A federal stakeholder is siding with New Jersey retailers in an ongoing battle over a law turning unused balances of gift cards over to state government.
The U.S. Chamber of Commerce announced it has filed an amicus brief to the Third Circuit Court of Appeals, decrying the state’s attempt to claim the unused funds.
“The New Jersey law challenged here is part of a disturbing trend in which states have misused their escheatment laws to raise revenue, rather than to reunite owners with their lost property, the traditional purpose of escheat,” the chamber said in its brief. The chamber also said its interest in the case was due to the “effect of confiscating private property from businesses that comprise the chamber’s membership.”
Earlier this year, the New Jersey Retail Merchants Association successfully sued the state to prevent the enforcement of the law, which passed in June 2010.
“We certainly welcome their involvement,” said John Holub, president of the New Jersey Retail Merchants Association. “This is such an anti-business, anti-consumer piece of legislation — it’s not surprising that a leading national business organization would want to weight in on it.”
As previously reported by NJBIZ, the state estimated the law would raise $79.58 million in the fiscal year ending June 30, while the nonpartisan Office of Legislative Services estimated the revenue as $32.9 million to $54.9 million. However, a U.S. district judge has ruled that the law can’t be applied retroactively, so the state can’t collect the money for most of this fiscal year.
Holub called the bill “nothing more than a money grab.”
“We fully recognize the dire financial straits the state has been in, however this is not the way to balance the budget — and it’s certainly not the way escheat laws were ever intended to be used,” he added.
The U.S. Chamber’s position focused on the retroactive application of the law, which would apply the escheat to gift cards already purchased.
The brief states that under escheatment laws, a state can claim abandoned property for public use, but unused funds on a gift card are owned by its issuer, and therefore are not abandoned.
Two more rounds of briefs are expected to be filed, according to Holub, and the case will be handed over to the court to rule on after May 9.
E-mail Melinda Caliendo at [email protected]