ESTES v. USA
OPINION granting 108 Motion to Certify Interlocutory Appeal; granting 108 Motion to Stay. Signed by Judge Elaine D. Kaplan. (bl) Copy to parties.
In the United States Court of Federal Claims
(Filed: December 1, 2017)
JAKE LATURNER, Treasurer of the State
THE UNITED STATES OF AMERICA,
Keywords: 28 U.S.C. § 1292(d)(2);
Interlocutory Appeal; Stay Pending
J. Brett Milbourn, Walters Bender Strohbehn & Vaughn, P.C., Kansas City, MO, with whom
was David C. Frederick, Kellogg, Hansen, Todd, Figel & Frederick, P.L.L.C., Washington, DC,
for Plaintiff. Scott Gates, General Counsel, Office of the Kansas State Treasurer, Topeka, KS, Of
Eric P. Bruskin, Senior Trial Counsel, Civil Division, U.S. Department of Justice, Washington,
DC, with whom were Steven J. Gillingham, Assistant Director, Robert E. Kirschman, Jr.,
Director, and Chad A. Readler, Principal Deputy Assistant Attorney General, for Defendant.
Theodore C. Simms, II, Attorney-Advisor, U.S. Department of the Treasury, and Albert S.
Iarossi, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of
Justice, Of Counsel.
OPINION AND ORDER
On August 8, 2017, this Court issued an Opinion and Order (Order) granting the motion
for partial summary judgment filed by Plaintiff Jake LaTurner, Treasurer of the State of Kansas
(Kansas). See LaTurner v. United States, 133 Fed. Cl. 47 (2017); see also Estes v. United States,
123 Fed. Cl. 74 (2015) (denying the government’s motion to dismiss). The Court ruled that under
the Department of Treasury’s regulations, Kansas is the rightful owner of certain U.S. savings
bonds that it does not possess but to which it asserted title pursuant to a state court judgment of
escheat issued under the authority of the Kansas Disposition of Unclaimed Property Act
(Unclaimed Property Act). See LaTurner, 133 Fed. Cl. at 69. The federal government has now
filed a motion under 28 U.S.C. § 1292(d)(2) to certify this Court’s Order for interlocutory appeal
and to stay proceedings pending appeal. See Def.’s Mot. to Certify the Court’s Order of Aug. 8,
2017 for Interlocutory Appeal and to Stay Proceedings Pending Appeal (Def.’s Mot.), ECF No.
For the reasons set forth below, the Court agrees that its August 8, 2017 opinion involves
“a controlling question of law . . . with respect to which there is a substantial ground for
difference of opinion and that an immediate appeal . . . may materially advance the ultimate
termination of the litigation.” See 28 U.S.C. § 1292(d)(2). Accordingly, the motion to certify is
GRANTED. In addition, the government’s motion to stay proceedings pending appeal is also
The Motion to Certify
Section 1292(d)(2) of Title 28 provides, in pertinent part, as follows:
[W]hen any judge of the United States Court of Federal Claims, in
issuing an interlocutory order, includes in the order a statement that
a controlling question of law is involved with respect to which there
is a substantial ground for difference of opinion and that an
immediate appeal from that order may materially advance the
ultimate termination of the litigation, the United States Court of
Appeals for the Federal Circuit may, in its discretion, permit an
appeal to be taken from such order, if application is made to that
Court within ten days after the entry of such order.1
Thus, to certify an interlocutory appeal of its order, the Court must find that the order
(1) “involves a controlling question of law,” (2) “as to which there is substantial ground for
difference of opinion,” and (3) “that an immediate appeal may materially advance the ultimate
termination of the litigation.” As the Wright and Miller treatise observes, “[t]he three factors
should be viewed together as the statutory language equivalent of a direction to consider the
probable gains and losses of immediate appeal.” 16 Charles Alan Wright et al., Fed. Prac. &
Proc. Juris. § 3930 (3d ed. Apr. 2017 Update) (footnote omitted).
The Court finds that its Order involves a “controlling question of law.” Thus, the federal
government’s liability in this case turns largely on the proper interpretation of a Treasury
Department regulation that was in effect at the time Kansas requested redemption of the bonds at
issue. That regulation—31 C.F.R. § 315.20(b) (2012)—then provided that Treasury “will
The language of section 1292(d)(2) “is virtually identical to 28 U.S.C. § 1292(b) . . . which
governs interlocutory review by other courts of appeals.” United States v. Connolly, 716 F.2d
882, 883 n.1 (Fed. Cir. 1983) (en banc). “Because the operative language is identical, the
legislative history and case law governing the interpretation of section 1292(b) is persuasive in
reviewing motions for interlocutory appeal under section 1292(d)(2).” Abbey v. United States,
89 Fed. Cl. 425, 429 (2009) (citation omitted).
recognize a claim against an owner of a savings bond . . . if established by valid, judicial
proceedings, but only as specifically provided in this subpart.”2
As described in its prior decisions in this case, the Court held that the state-law
proceedings that purported to vest Kansas with title to the savings bonds at issue, which had been
deemed abandoned under state law, were “valid judicial proceedings” within the meaning of the
regulation and that Kansas was therefore the owner of those bonds. In so holding, the Court
rejected the federal government’s interpretation of the Treasury regulations (which it found
inconsistent with both the language of the regulations and the position that Treasury had
previously taken regarding the effect of a state court judgment of escheat on bond ownership). It
also rejected the federal government’s contentions: 1) that the Unclaimed Property Act was
preempted by federal law; 2) that the state court judgment was invalid under the doctrine of
intergovernmental immunity; and 3) that the state court judicial proceedings violated the due
process rights of the former owners of the absent bonds. Further, the Court rejected as premature
the federal government’s argument that even assuming that Kansas owned the bonds pursuant to
the state court escheat proceedings, Treasury regulations precluded it from recovering the
proceeds of bonds that were not in the state’s possession.
The issues the Court decided in granting-in-part Kansas’s motion for partial summary
judgment were purely legal ones. The legal issues were “controlling” because—if the Court had
agreed with the federal government’s position—then the result would have been judgment as a
matter of law in favor of the government. Instead, the Court has concluded that title to the absent
bonds lies with Kansas, which may entitle it to an award of damages given Treasury’s refusal to
grant Kansas’s request to redeem the bonds.
The Court reached its decision after careful consideration of the legal issues presented
and the parties’ arguments, and is convinced that its decision is correct. Nonetheless, the
questions of regulatory interpretation presented in this case involve issues of first impression.
Moreover, the Department of Treasury recently engaged in a formal rulemaking process in which
it promoted an interpretation of its former regulations that is at odds with the Court’s views. See
80 Fed. Reg. at 80,258–60.
On July 1, 2015 (while the government’s motion to dismiss in this case was pending), Treasury
issued a Notice of Proposed Rulemaking in which it proposed revising its savings bond
regulations to expressly address state court judgments of escheat pursuant to title-based
unclaimed property laws. See Regulations Governing U.S. Savings Bonds, 80 Fed. Reg. 37,55901 (July 1, 2015). After a period of notice and comment, Treasury issued the final revised
regulations on December 24, 2015. Regulations Governing U.S. Savings Bonds, 80 Fed. Reg.
80,258-01 (Dec. 24, 2015). As relevant to the issue presented in this case, the revised rule
amended 31 C.F.R. § 315.20(b) to add a sentence stating that “[e]scheat proceedings will not be
recognized under this subpart.” Id. at 80,264. It also added a new provision, § 315.88, which
stated that Treasury “may, in its discretion, recognize an escheat judgment that purports to vest a
State with title to a definitive savings bond that has reached the final extended maturity date” but
only if the bond “is in the State’s possession.” Id.
In addition, in Estes v. United States Department of the Treasury, 219 F. Supp. 3d 17
(D.D.C. 2016), Judge Cooper—albeit in another context—took a somewhat different view of the
Department of Treasury’s previous pronouncements regarding whether Treasury would
recognize state claims of bond ownership based on state court escheat judgments. This Court
concluded that for more than sixty years, the Department of Treasury had advised inquiring
states, the public, and the federal courts (including the Supreme Court) that it would recognize
claims of ownership that were based on judgments pursuant to title-based escheatment statutes
like Kansas’s. Judge Cooper found it less clear than did this Court that Treasury’s prior
statements governing the recognition of state ownership claims applied when the state did not
have the bonds in its possession. See Estes v. U.S. Dep’t of the Treasury, 219 F. Supp. 3d at 28–
30. Given that this Court relied at least in part on the Department of Treasury’s historical
interpretation of its regulations, Judge Cooper’s perspective provides another basis for the Court
to conclude that there exist grounds for a difference of opinion regarding this Court’s opinion on
this controlling legal issue.3
Finally, the Court is of the view that an immediate appeal of its disposition of these legal
issues “may materially advance the ultimate termination of the litigation.” The parties differ
wildly in their estimates of the time and expense of the discovery that will be required to resolve
the remaining issues in this case. On the one hand, the government claims that in order to comply
with its discovery obligations, Treasury will be required to search “approximately 3.8 billion
savings bond records, at an estimated cost exceeding $100 million and a level of effort exceeding
2000 years of employee time.” See Def.’s Mot. App. at 2, ECF No. 108-1 (Declaration of
Michael J. McDougle) (emphasis in original). Kansas, on the other hand, argues that the
government’s estimates are “demonstrably false” and that “existing technologies will enable the
parties to identify Kansas’s bonds efficiently and cost-effectively, without the type of costly and
time-consuming reorganization of records Treasury proposes.” Pl.’s Resp. in Opp’n to Def.’s
Mot. to Certify the Court’s Order of Aug. 8, 2017 for Interlocutory Appeal and to Stay
Proceedings Pending Appeal (Pl.’s Opp’n) at 16, ECF No. 111.
As Wright and Miller observe, “[t]he advantages of immediate appeal increase” with,
among other conditions “the length of the district court proceedings saved by reversal of an
erroneous ruling, and the substantiality of the burdens imposed on the parties by a wrong ruling.”
Wright et al., supra, § 3930. Regardless of which party’s estimates are more accurate, the Court
does not doubt that considerable effort and expense will be required to identify the absent
bondholders whose last known addresses were in Kansas. Thus, at the present time, the savings
bond records are either contained on microfilm or have been digitized from microfilm but are not
The federal government contends that this Court decided a controlling question of law by
supposedly “suggest[ing] that Kansas was entitled to receive the bond serial
numbers . . . pursuant to 31 C.F.R. §§ 1.5 and 323.2,” Treasury’s regulations implementing the
Freedom of Information Act (FOIA). Def.’s Mot. at 10–12. The Court referenced those
regulations only in summarizing Kansas’s argument. See LaTurner, 133 Fed. Cl. at 65. It did not
make any determination regarding Kansas’s right to secure such information under FOIA, which
the federal government correctly points out would be beyond this Court’s jurisdiction. See Def.’s
Mot. at 11.
readily searchable by address. Further, there are currently eight other cases in this Court in which
other states assert claims similar to those asserted by Kansas.4 If the Court’s decision is found
erroneous by the court of appeals on interlocutory review, it will save both the parties and the
Court from bearing the burden of an enormous and unnecessary expenditure of effort.
In fact, under the circumstances, it is clear to the Court that an immediate appeal “may
materially advance the ultimate termination of the litigation” even if the court of appeals agrees
with this Court’s reasoning and affirms its decision. Thus, the government likely will remain
reluctant to make the investments that will be needed to identify the relevant former bond owners
and to redeem the absent bonds to Kansas (or the other states) before the ownership issue has
been finally adjudicated. The Court thus anticipates that contentious and protracted discovery
and damages phases lie ahead in this case if they must proceed before an authoritative
determination on that question. On the other hand, the Court expects that if its ruling is upheld
through subsequent appeals, the parties may be able to work on a cooperative basis to resolve the
practical and logistical challenges of the remainder of the litigation.
The Government’s Request for a Stay
Section 1292(d)(3) of Title 28 provides that “[n]either the application for nor the granting
of an appeal under this subsection shall stay proceedings in the . . . Court of Federal Claims . . .
unless a stay is ordered by a judge of the . . . Court of Federal Claims or by the United States
Court of Appeals for the Federal Circuit or a judge of that court.” The government asks the Court
to exercise its discretion to stay the proceedings in this case pending appeal on the grounds that
“further proceedings in this case would impose massive burdens on Treasury and the taxpayer,
jeopardize fragile bond records, and invade the privacy rights of U.S. savings bond owners.”
Def.’s Mot. at 12.
“[T]he power to stay proceedings is incidental to the power inherent in every court to
control the disposition of the causes on its docket with economy of time and effort for itself, for
counsel, and for litigants. How this can best be done calls for the exercise of judgment, which
must weigh competing interests and maintain an even balance.” Air Line Pilots Ass’n v. Miller,
523 U.S. 866, 879 n.6 (1998) (quoting Landis v. N. Am. Co., 299 U.S. 248, 254–55 (1936))
(alteration in original).
In this case, the Court concludes that a stay of proceedings is warranted for the same
reasons that it has decided to certify its decision for interlocutory appeal in the first instance. As
noted above, the burdens of discovery going forward (both in terms of effort and expense) will
undoubtedly be formidable given the state of Treasury’s savings bond records for the years in
question. On the other hand, Plaintiff Kansas will not be materially prejudiced by a stay of
See Sattgast v. United States, No. 15-1364 (South Dakota); Kennedy v. United States, No. 151365 (Louisiana); Lea v. United States, No. 16-43 (Arkansas); Ball v. United States, No. 16-221
(Kentucky); Fitch v. United States, No. 16-231 (Mississippi); Loftis v. United States, No. 16-451
(South Carolina); Zoeller v. United States, No. 16-699 (Indiana); Atwater v. United States, No.
16-1482 (Florida). With the exception of Lea, on which the Court ruled the same day that it ruled
in the present case, the Court has stayed the other cases pending disposition of the instant case.
proceedings during the pendency of any appeal. And the Court is not persuaded by Kansas’s
assertion that in the time it takes for an appeal to be adjudicated “Kansas’s prospects of ever
obtaining the bond information to which it is entitled” will be materially “endanger[ed].” Pl.’s
Opp’n at 17–18 (emphasis in original).
On the basis of the foregoing, the federal government’s Motion to Certify the Court’s
Order of August 8, 2017 for Interlocutory Appeal and to Stay Proceedings Pending Appeal is
GRANTED. The Court’s Opinion and Order of August 8, 2017 is therefore AMENDED to
include the following express finding:
The Court finds that this order involves a controlling question of law
with respect to which there is a substantial ground for difference of
opinion and that an immediate appeal from the order may materially
advance the ultimate termination of the litigation.
Further, this case is STAYED pending the court of appeals’ disposition of any appeal.
IT IS SO ORDERED.
s/ Elaine D. Kaplan
ELAINE D. KAPLAN
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