LEA v. USA
OPINION granting 32 Motion to Certify Interlocutory Appeal; granting 32 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)
ANDREA LEA, Auditor of the State of
THE UNITED STATES OF AMERICA,
Keywords: 28 U.S.C. § 1292(d)(2);
Interlocutory Appeal; Stay Pending
David H. Thompson, Cooper & Kirk, PLLC, Washington, DC, for Plaintiff. Peter A.
Patterson and John D. Ohlendorf, Cooper & Kirk, PLLC, and Joseph H. Meltzer and
Melissa L. Troutner, Kessler Topaz Meltzer & Check LLP, Radnor, PA, Of Counsel.
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 Andrea Lea, Auditor of the State
of Arkansas (Arkansas). See Lea v. United States, 132 Fed. Cl. 705 (2017). The Court
ruled that under the Department of Treasury’s regulations, Arkansas 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 state’s
unclaimed property law. See Lea, 132 Fed. Cl. at 724. 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. 32.
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 GRANTED.
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 Arkansas requested
redemption of the bonds at issue. That regulation—31 C.F.R. § 315.20(b) (2012)—then
provided that Treasury “will recognize a claim against an owner of a savings bond . . . if
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).
established by valid, judicial proceedings, but only as specifically provided in this
As described in Lea (and in its ruling on the government’s motion to dismiss in
LaTurner), the Court held that the state-law proceedings that purported to vest Arkansas
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
Arkansas 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 Arkansas’s
unclaimed property law 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 Arkansas 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 Arkansas’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 Arkansas, which may entitle it
to an award of damages given Treasury’s refusal to grant Arkansas’s request to redeem
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
On July 1, 2015 (while the government’s motion to dismiss in the related case of
LaTurner v. United States was pending, see 133 Fed. Cl. 47, 63–64 (2017)), 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.
37,559-01 (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
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.
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 Arkansas’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 in their view of the time and expense of the discovery that will be required
to resolve the remaining issues in this case. 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.
32-1 (Declaration of Michael J. McDougle) (emphasis in original). Arkansas, on the other
hand, argues that “it is difficult to believe that the technology does not exist to make
Treasury’s records electronically text-searchable.” Pl.’s Resp. in Opp’n to Def.’s Mot. to
Certify an Interlocutory Appeal and to Stay Proceedings Pending Appeal (Pl.’s Opp’n) at
13, ECF No. 35.
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
The federal government contends that this Court decided a controlling question of law
by supposedly “suggest[ing] that Arkansas 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 Arkansas’s argument. See Lea, 132
Fed. Cl. at 720–21. It did not make any determination regarding Arkansas’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.
parties by a wrong ruling.” Wright et al., supra, § 3930. Even if there exists technology
that the government could employ to reduce the burden, the Court does not doubt that
considerable effort and expense will be required to identify the absent bondholders whose
last known addresses were in Arkansas. Thus, at the present time, the savings bond
records are either contained on microfilm or have been digitized from microfilm but are
not 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 Arkansas.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 Arkansas (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 the 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
See LaTurner v. United States, No. 13-1011; Sattgast v. United States, No. 15-1364
(South Dakota); Kennedy v. United States, No. 15-1365 (Louisiana); (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. 16699 (Indiana); Atwater v. United States, No. 16-1482 (Florida). With the exception of
LaTurner, 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.
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, the Court is not persuaded that
Arkansas would be materially prejudiced by a stay of proceedings during the pendency of
any appeal, despite its conclusory assertion that “[e]ach day that passes with the
Government refusing to cooperate in identifying Arkansas’s bonds causes [it] substantial
injury.” Pl.’s Resp. at 14. Accordingly, the government’s motion to stay the case is
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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