Treasurer State NJ v. US Dept Treas ( 2012 )


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  •                                    PRECEDENTIAL
    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    ______________
    No. 10-1963
    ______________
    TREASURER OF THE STATE OF NEW JERSEY;
    TREASURER OF THE STATE OF NORTH CAROLINA;
    DIRECTOR OF THE DEPARTMENT OF REVENUE OF
    THE STATE OF MONTANA; TREASURER OF THE
    STATE OF KENTUCKY; TREASURER OF THE STATE
    OF OKLAHOMA; ATTORNEY GENERAL OF THE
    STATE OF MISSOURI; TREASURER OF THE STATE OF
    PENNSYLVANIA
    v.
    UNITED STATES DEPARTMENT OF THE TREASURY;
    SECRETARY OF THE UNITED STATES TREASURY
    DEPARTMENT;
    BUREAU OF PUBLIC DEBT, a Division of the United
    States Treasury Department; COMMISSIONER OF THE
    BUREAU OF PUBLIC DEBT,
    Treasurer of the State of New Jersey,
    Director of the Department of Revenue
    of the State of Montana,
    Treasurer of the State of Kentucky,
    Treasurer of the State of Oklahoma,
    Attorney General of the State of
    Missouri,
    Treasurer of the State of Pennsylvania,
    Appellants
    (Pursuant to Fed. R. App. P. 43(c)(1))
    ______________
    On Appeal from the United States District Court
    for the District of New Jersey
    (D.C. Civ. No. 04-4368)
    Honorable Mary L. Cooper, District Judge
    ______________
    Argued April 11, 2012
    BEFORE: HARDIMAN, GREENAWAY, JR., and
    GREENBERG, Circuit Judges
    (Filed: June 27, 2012)
    ______________
    Carter G. Phillips (argued)
    Sidley Austin
    1501 K Street, N.W.
    Washington, DC 20005
    Peter G. Angelos
    M. Albert Figinski
    Law Offices of Peter G. Angelos
    2
    100 North Charles Street
    One Charles Center, 22nd Floor
    Baltimore, MD 21201
    Randall K. Berger
    Joanne M. Cicala
    Roger W. Kirby
    Kirby McInerney
    825 Third Avenue
    16th Floor
    New York, NY 10022
    William C. Cagney
    Robert J. Luddy
    Windels, Marx, Lane & Mittendorf
    120 Albany Street Plaza, 6th Floor
    New Brunswick, NJ 08901
    William H. Murphy, Jr.
    Andrew J. Toland
    The Murphy Firm
    1 South Street, 23rd Floor
    Baltimore, MD 21202
    Ernest A. Young
    203 Strolling Way
    Durham, NC 27707
    Jeremiah J. Morgan, Sr.
    Joel A. Poole
    Office of Attorney General of Missouri
    3
    P.O. Box 899
    Jefferson City, MO 65101
    Gita F. Rothschild
    McCarter & English
    100 Mulberry Street
    Four Gateway Center, 14th Floor
    Newark, NJ 07102-06552
    Attorneys for Appellants
    Alisa B. Klein (argued)
    Mark B. Stern
    United States Department of Justice, Civil Division
    950 Pennsylvania Avenue, N.W.
    Washington, DC 20530
    David E. Dauenheimer
    Office of the United States Attorney
    970 Broad Street, Room 700
    Newark, NJ 07102
    Attorneys for Appellees
    ______________
    OPINION OF THE COURT
    ______________
    GREENBERG, Circuit Judge.
    I.     INTRODUCTION
    4
    In this action seven plaintiff States (“the States”) sought
    to recover proceeds of matured but unredeemed United States
    savings bonds from the United States Treasury (“the
    Treasury”).1 In addition to the Treasury, the States also named
    other United States Government entities and officials in their
    official capacities as defendants and we refer to all the
    defendants collectively as the “Government” or “Federal
    Government.” The States asserted that the Treasury has
    possession of approximately $16 billion worth of matured but
    unredeemed savings bonds, of which persons whose last known
    addresses were within the plaintiff States own $1.6 billion. The
    States contended that their respective unclaimed property acts
    obliged the Treasury to account for and deliver the proceeds of
    these bonds to the States for reunification with their owners.
    The Government moved to dismiss the case and the District
    Court granted its motion as it concluded that the Government‟s
    sovereign immunity and intergovernmental immunity barred the
    action and that federal law and regulations preempted the States‟
    statutory authority to obtain the proceeds of the savings bonds.
    Six of the States appealed. Though we do not agree with the
    District Court with respect to the application of sovereign
    immunity, we do agree with its other conclusions and therefore
    we will affirm.
    II.        FACTS AND PROCEDURAL HISTORY
    A.     The United States Savings Bond Program
    1
    Throughout this opinion we refer to the plaintiffs in this action
    as “States” but to the 50 states as a whole as “states.”
    5
    Pursuant to its constitutional power “to borrow money on
    the credit of the United States,” Free v. Bland, 
    369 U.S. 663
    ,
    666-67, 
    82 S. Ct. 1089
    , 1092 (1962) (citing U.S. Const. art. I, §
    8, cl. 2), Congress delegated authority to the Secretary of the
    Treasury (“the Secretary”), with the approval of the President, to
    issue savings bonds “for expenditures authorized by law.” 31
    U.S.C. § 3105(a).2 The Government sold savings bonds,
    originally called liberty bonds, “[t]o obtain money for the United
    States Government . . . [and] to encourage thrift and savings by
    small investors.” Moore‟s Adm‟r v. Marshall, 
    196 S.W.2d 369
    ,
    372 (Ky. 1946). A United States savings bond is a contract
    between the United States and the bond‟s owner. Rotman v.
    United States, 
    31 Fed. Cl. 724
    , 725 (Fed. Cl. 1994). The
    Secretary may establish the terms and conditions that govern the
    savings bond program, a power that includes the authority to fix
    the bonds‟ investment yield, to promulgate terms and conditions
    providing that bondholders may keep the bonds beyond the date
    of their maturity, and to place conditions on transfer and
    redemption of the bonds and their sales prices. 31 U.S.C. §
    3105(b)-(c). Most of the bonds that are the subject matter of
    this case are Series E bonds issued between 1941 and 1980. The
    Government sold the Series E bonds at a discount and paid
    interest on them only at maturity; according to the States, after
    maturity interest stopped accruing on the bonds.3 The last Series
    2
    This statute previously was codified at 31 U.S.C. § 757c(a).
    See Free, 369 U.S. at 666-67, 82 S.Ct. at 1092.
    3
    The plaintiff States‟ representation that interest ceased to
    accrue on Series E bonds after maturity may be somewhat
    misleading but we will accept it in adjudicating this appeal. The
    reason we think that this representation may be misleading is
    6
    E bonds matured in 2011.
    Pursuant to his statutory authority, the Secretary has
    promulgated various regulations governing the savings bond
    program that the Supreme Court has held preempt conflicting
    state law. See United States v. Chandler, 
    410 U.S. 257
    , 262, 
    93 S. Ct. 880
    , 883 (1973) (citing Free 369 U.S. at 668, 82 S.Ct. at
    1093) (“[A]bsent fraud, the regulations creating a right of
    survivorship in United States Savings Bonds . . . pre-empt[] any
    inconsistent state property law.”). In contrast to many other
    types of securities, “[s]avings bonds are not transferable and are
    that 31 U.S.C. § 3105(b)(2)(A) indicates that the Secretary may
    prescribe regulations that provide for savings bonds to continue
    to earn interest during “a period beyond maturity.” Moreover,
    31 C.F.R. § 315.30 provides that “[a]ll Series E bonds and
    savings notes have been extended and continue to earn interest
    until their final maturity dates, unless redeemed earlier.” The
    regulations allow for such an “extended maturity period,” a
    “period after the original maturity date during which the owner
    may retain a bond and continue to earn interest on the maturity
    value” of the bond. 31 C.F.R. § 315.2(c). We see little
    difference between a bond paying interest accrued beyond
    maturity and extending a bond‟s maturity date for a period
    during which the bond earns interest. Indeed, it appears that
    when this action was commenced in 2004 some Series E bonds
    had passed their original maturity dates but were continuing to
    earn interest as their maturity dates had been extended. See 31
    C.F.R. § 316.8. Obviously, if interest runs after the bonds‟
    original maturity dates, the States‟ case, if affected at all, only
    could be weaker.
    7
    payable only to the owners named on the bonds, except as
    specifically provided in [the federal] regulations and then only
    in the manner and to the extent so provided.” 31 C.F.R. §§
    315.15, 353.15.
    There are limited exceptions to the general rule
    precluding the transfer of savings bonds, including cases in
    which a third party attains an interest in a bond through valid
    judicial proceedings. 31 C.F.R. §§ 315.20(b), 353.20(b).4 As
    4
    31 C.F.R. § 315.39(a) and (b) provide for payment of series A,
    B, C, D, E, F, G, H, J, and K bonds, and 31 C.F.R. § 353.39(a)
    provides for payment of series EE bonds. The regulations
    contain identical language:
    The Department of the Treasury will recognize a
    claim against an owner of a savings bond and
    conflicting claims of ownership of, or interest in,
    a bond between coowners or between the
    registered owner and the beneficiary, if
    established by valid, judicial proceedings, but
    only as specifically provided in this Subpart.
    Section 315.23 [or section 353.23] specifies the
    evidence required to establish the validity of the
    judicial proceedings.
    31 C.F.R. §§ 315.20(b), 353.20(b). 31 C.F.R. § 315.23 requires
    “that certified copies of the final judgment, decree, or court
    order, and of any necessary supplementary proceedings,” be
    submitted to establish the validity of judicial proceedings, and
    also makes provisions for payment to certain bankruptcy trustees
    8
    will be seen below, it is highly significant that the regulations do
    not impose any time limits for bond owners to redeem the
    savings bonds, at least with respect to the bonds that are the
    subject matter of this case. Consequently, their owners can
    present them for payment to an authorized agent of the United
    States at any time. See 31 U.S.C. § 3105(b)(2)(A) (authorizing
    the Secretary to promulgate regulations providing that “owners
    of savings bonds may keep the bonds after maturity”). Though
    it might be thought unlikely that an owner would present a long-
    matured savings bond for redemption, the record shows that the
    Treasury as of 1989 was receiving claims of $7,000 to $10,000 a
    day for payment on savings bonds that had matured many years
    earlier. App. at 169.5 As relevant here, a registered owner of a
    bond is presumed conclusively to be its owner absent errors in
    registration. 31 C.F.R. §§ 315.5, 353.5.
    The redemption process is not complex, as the owner of a
    bond seeking to redeem it need only present the bond to an
    authorized payment agent for redemption, 31 C.F.R. §§
    315.39(a), 353.39(a), establish his identity, sign the request for
    payment, and provide his address. The agent then may pay the
    bond with a check drawn against funds of the United States.
    and receivers.
    5
    We note that the States in their complaint assert that “[n]ot
    surprisingly, Treasury has not been approached by owners in
    significant numbers seeking long-matured savings bonds.” We
    cannot reconcile this allegation with the evidence in the record
    to which we have referred.
    9
    See 31 C.F.R. §§ 315.38, 353.38. Payment agents, ordinarily
    banks, are financial institutions qualified under Treasury
    regulations to pay sums due on savings bonds. See 31 C.F.R. §§
    315.2(j), 353.2(f). The relevant statutes and regulations do not
    contain provisions for locating owners of matured but
    unredeemed bonds. In 2000, the Treasury, however, created a
    “Treasury Hunt” Internet website, which provides information
    on matured but unredeemed Series E bonds issued after 1974 in
    a database searchable by Social Security Number.6
    B.     The States‟ Unclaimed Property Acts
    All of the plaintiff States have enacted unclaimed
    property acts, most of which they have based on some version of
    the Uniform Unclaimed Property Act, which is rooted in the
    common-law doctrine of escheat. See Conn. Mut. Life Ins. Co.
    v. Moore, 
    333 U.S. 541
    , 547, 
    68 S. Ct. 682
    , 686 (1948) (“The
    right of appropriation by the state of abandoned property has
    existed for centuries in the common law.”). The plaintiff-
    appellant States of New Jersey, Kentucky, Montana, Oklahoma,
    Missouri and Pennsylvania claim that the unclaimed bonds are
    property of their residents within the meaning of their respective
    unclaimed property acts. See New Jersey Uniform Unclaimed
    Property Act, N.J. Stat. Ann. § 46:30B-1 et seq. (West 2003);
    Kentucky statutes regarding descent, wills and the
    administration of decedents‟ estates, Ky. Rev. Stat. Ann. §
    6
    The website is available at Treasury Hunt,
    http://www.treasurydirect.gov/indiv/tools/tools_treasuryhunt.ht
    m.
    10
    393.010 et seq. (West 2012); Montana Uniform Unclaimed
    Property Act, Mont. Code Ann. § 70-9-801 et seq. (2012);
    Oklahoma Uniform Unclaimed Property Act, Okla. Stat. tit. 60,
    § 651 et seq. (2012); Missouri Uniform Disposition of
    Unclaimed Property Act, Mo. Ann. Stat. §§ 447.500 et seq.
    (West 2012); Pennsylvania statutes regarding disposition of
    abandoned and unclaimed Property, 72 Pa. Stat. Ann. § 1301.9
    et seq. (West 1995). The States‟ unclaimed property acts require
    that, after time periods that differ from State to State, holders of
    unclaimed property turn the property over to the State for
    safekeeping though the original property owner retains the right
    to recover the proceeds of the property. See, e.g., N.J. Stat.
    Ann. § 46:30B-7 (“Except as otherwise provided by this chapter,
    all property . . . that is held . . . and has remained unclaimed by
    the owner for more than three years after it became payable or
    distributable is presumed abandoned.”).
    The unclaimed property acts at issue in this case are
    “custody” escheat statutes rather than “title” escheat statutes in
    that under them the State does not take title to abandoned
    property, but, instead, obtains its custody and beneficial use
    pending identification of the property owner.7 Thus “[t]he
    7
    According to the plaintiff States, “statutes that transfer title
    [are] an obsolescent form of escheat no longer in force in any
    state.” Appellants‟ br. at 3. We have some question as to
    whether this statement may be overbroad as it is difficult to
    understand how there can be an escheat of real or tangible
    personal property without a transfer of title, inasmuch as a state
    to dispose of such property ordinarily would need to sell it to a
    purchaser who would want title to the property. We, however,
    11
    presumption of abandonment raised by the statute is rebuttable
    at any time.” John V. Orth, Escheat: Is the State the Last Heir?,
    13 Green Bag 2d 73, 82 (2009). Although “[t]he practical
    reason behind the states‟ action is to prevent unclaimed personal
    property being eventually appropriated by the present holder,”
    the state being “better able to provide long-term . . . custody” of
    the property, “it is sometimes admitted that the statutes are also
    a means of raising revenue.” Id. at 78 (citing, e.g., Louisiana
    Health Serv. & Indem. Co. v. McNamara, 
    561 So. 2d 712
    , 716
    (La. 1990)) (“Although one purpose of such acts is to protect the
    missing owners, the primary rationale behind this legislation is
    its use as a revenue raising device.”); see, e.g., Clymer v.
    Summit Bancorp., 
    792 A.2d 396
    , 400 (N.J. 2002) (noting that
    75% of the funds that New Jersey collects under its Uniform
    Unclaimed Property Act are transferred to the General State
    Fund, and the State “has full use” of the money “until the
    rightful owner comes forward to claim it”). Accordingly,
    consider that an inquiry into the accuracy of the States‟
    representation would be beyond the scope of this opinion and so
    do not make it. We recently described the New Jersey
    Unclaimed Property Act in American Express Travel Related
    Services, Inc. v. Sidamon-Eristoff, 
    669 F.3d 359
     (3d Cir. 2012),
    in which we upheld a New Jersey statute that reduced the period
    after which travelers checks are presumed abandoned from 15
    years to three years. Id. at 364. We indicated that after a
    transfer of abandoned property to the State of New Jersey it
    holds the property for the benefit of its owner in perpetuity. Id.
    at 365. Though American Express is an informative case with
    respect to the New Jersey act it does not address issues similar to
    those here.
    12
    though the States contend that their intent in bringing this action
    has been benevolent, the objective reality obviously is
    otherwise. The truth is that this case is a dispute between the
    States and the United States as to whether a State or the United
    States will obtain the benefit of having custody of and
    availability for use of the proceeds of the matured but
    unredeemed bonds even if it does not obtain title to the proceeds
    of the bonds or title to the bonds themselves.
    The unclaimed property acts contain specific provisions
    for presuming property to be “abandoned” when the United
    States either holds the property or is obligated to make payment
    for it to its owner. See N.J. Stat. Ann. § 46:30B-41.2
    (presuming property to be abandoned if unclaimed for more than
    one year after it became payable by “the executive, legislative,
    or judicial branch of the United States Government”); Okla.
    Stat. tit. 60, § 657 (property held by a state or other government
    presumed abandoned after being unclaimed for one year); Ky.
    Rev. Stat. Ann. § 393.068(1) (property held by Federal
    Government presumed abandoned if it remains unclaimed for
    more than five years); Mo. Rev. Stat. § 447.532(2) (property
    held by any agency or department of the United States deemed
    abandoned if unclaimed for more than three years); Mont. Code
    Ann. § 70-9-803(1)(k) (property held by a government or
    governmental subdivision unclaimed one year after it becomes
    distributable presumed abandoned); 72 Pa. Stat. Ann. § 1301.9
    (any property held for its owner by any “instrumentality of the
    United States” unclaimed for five years from the date it first
    became demandable or distributable presumed abandoned).
    C.     The States‟ Efforts to Claim Proceeds of Matured
    13
    but Unredeemed Savings Bonds
    Over the last several decades, various states have sought
    to recover the proceeds from matured but unredeemed savings
    bonds. On February 27, 1952, the Treasury issued a bulletin
    reprinting a letter dated January 28, 1952, from the Secretary to
    the Comptroller of the State of New York in response to the
    Comptroller‟s inquiry regarding “the prospective right of the
    state of New York . . . to receive payment of certain United
    States securities of which it is not the registered owner.” App.
    at 134. The Secretary explained that the Federal Government
    would pay the proceeds of savings bonds to the State of New
    York if it actually obtained title to the bonds, but would not do
    so where the State merely obtained a right to the custody of the
    proceeds. The Secretary made this distinction because he
    believed that the effect of applying a custody-based escheat
    statute to savings bonds would
    either provide the obligor with a discharge, valid
    within and without New York, or fail to provide
    such discharge. If the discharge is provided in the
    case of the ordinary debtor, then the other party to
    the contract has substituted for his right to pursue
    his obligor in any jurisdiction, a right merely to
    prosecute a claim against the State Comptroller of
    New York; if an effective discharge is not
    provided, the obligor is subject to suit outside the
    State of New York and the necessity of making
    double payment — in exchange he has a right to
    claim relief from the Comptroller under . . . [New
    York‟s] Abandoned Property Law.
    14
    Id. at 135. The Secretary concluded that “[n]either of these
    possible alterations of [the] contract [created by the savings
    bond] is contemplated in the agreement by which the United
    States pledges its faith on its securities,” because “the rights and
    duties of the United States are governed by federal rather than
    local law.” Id. at 135-36.
    To the best of our knowledge the Treasury last articulated
    its position with respect to the application of state escheat laws
    on savings bonds or their proceeds in 2000 on its Internet
    website, “EE/E Savings Bonds FAQs” (frequently asked
    questions). In particular, the Treasury posted an answer to the
    question: “In a state that has a permanent escheatment law, can
    the state claim the money represented by securities that the state
    has in its possession. For example, can a state cash savings
    bonds that it‟s gotten from abandoned safe deposit boxes?” The
    plaintiff States refer to the Treasury‟s answer to this question —
    which is consistent with the bulletin that the Treasury issued
    almost one half of a century earlier and that we have quoted —
    as the “Escheat Decision.” The Escheat Decision answered that:
    The Department of the Treasury will
    recognize claims by States for payment of United
    States securities where the States have succeeded
    to the title and ownership of the securities
    pursuant to valid escheat proceedings. The
    Department, however, does not recognize claims
    for payment by a State acting merely as custodian
    of unclaimed or abandoned securities and not as
    successor in title and ownership of the securities.
    15
    In other words, the Treasury recognizes
    escheat statutes that provide that a State has
    succeeded to the legal ownership of securities
    because in such case payment of the securities
    results in full discharge of the Treasury‟s
    obligation and this discharge is valid in all
    jurisdictions.
    But, payment of securities to a State
    claiming only as a custodian results in the
    substitution of one obligor, the Department of the
    Treasury, for another, the State. Not only is there
    serious question whether there is authority for a
    State to effect such a substitution, but also there
    seems to be no basis for believing that payment to
    a State custodian would discharge Treasury of its
    obligation. Even if the discharge were claimed
    effective in the State to which the payment is
    made, it is believed that the Treasury‟s obligation
    and liability would still remain in force in all
    other jurisdictions.8
    In the District Court, the parties stipulated that the Escheat
    Decision “is defendants‟ interpretation of federal savings bond
    8
    The Escheat Decision took this statement nearly verbatim from
    a 1983 letter from the Treasury to the State of Kentucky. See
    app. at 139.       The Escheat Decision is available at
    http://www.treasurydirect.gov/indiv/research/indepth/ebonds/res
    _e_bonds_eefaq.htm.
    16
    regulations . . . and reflects defendants‟ understanding of
    existing laws” and that “the Department has no intention of
    deviating from the statement.” Id. at 142. The Treasury,
    however, has not adopted the Escheat Decision as a rule in
    accordance with the Administrative Procedure Act (“APA”), 5
    U.S.C. § 551 et seq.
    D.     Procedural History
    The Treasurer of the State of New Jersey filed this action
    on September 8, 2004, against the Treasury, the Secretary, the
    Bureau of Public Debt,9 and the Commissioner of the Bureau of
    Public Debt under the New Jersey Uniform Unclaimed Property
    Act. The Treasurer of the State of North Carolina joined the
    action shortly thereafter.10 The plaintiff States sought an order
    directing the Government to pay the proceeds of matured but
    unredeemed savings bonds to the plaintiff States according to
    the last known addresses of their owners and for an accounting
    of the amounts owed pursuant to their unclaimed property acts.
    It was and remains clear that if the unclaimed property acts are
    applied as written, by their terms they would entitle the States to
    substantially the relief that they seek in this action.
    Nevertheless, on February 5, 2005, the Government moved to
    dismiss or transfer the action to the United States Court of
    Federal Claims as it contended that only that court had subject
    9
    The Bureau of Public Debt is the division of the Treasury
    responsible for administrating the savings bond program.
    10
    North Carolina has not joined in this appeal. See app. at 1
    (notice of appeal).
    17
    matter jurisdiction. In making this motion the Government
    contended that the only applicable waiver of sovereign
    immunity that would permit this action to proceed was within
    the Tucker Act, which grants the Court of Federal Claims
    jurisdiction over “any claim against the United States founded
    either upon the Constitution, or any Act of Congress or any
    regulation of an executive department, or upon any express or
    implied contract with the United States, or for liquidated or
    unliquidated damages in cases not sounding in tort.” 28 U.S.C.
    § 1491(a)(1). The District Court agreed with the Government
    with respect to the court that should entertain the action as it
    transferred the case to the Court of Federal Claims in July of
    2005 pursuant to 28 U.S.C. § 1631 as it held that the States‟
    claims were “based on contracts” — the savings bonds. The
    States appealed from the order for transfer to the United States
    Court of Appeals for the Federal Circuit, the court with
    jurisdiction to entertain appeals from the Court of Federal
    Claims as the transferee court, rather than to this Court. See
    Carteret Sav. Bank v. Shushan, 
    919 F.2d 225
    , 228 (3d Cir.
    1990).
    On June 15, 2006, the Court of Appeals for the Federal
    Circuit held that the Court of Federal Claims lacked jurisdiction
    over this case and the court of appeals accordingly remanded the
    case to the District Court for further proceedings. See
    McCormac v. U.S. Dep‟t of Treasury, 185 F. App‟x 954 (Fed.
    Cir. 2006). In briefs filed in the court of appeals, the United
    States acknowledged that it had erred in requesting the transfer
    and conceded that the case was not within the limited
    jurisdiction of the Court of Federal Claims. The court of
    appeals wrote that the Court of Federal Claims did not have
    18
    jurisdiction because the States “do not assert a contractual
    relationship . . . that provides a substantive right to money
    damages.” Id. at 955. Accordingly, “although the States [were]
    asserting a claim that involves a contract, they [were] not
    asserting a contract claim for money damages against the
    government.” Id. at 956. Moreover “[t]he States [were] not
    named parties to the bond contract, [and thus there was not]
    privity between the States and the Government.” Id. The court
    of appeals noted that the States, by operation of their unclaimed
    property acts, sought to act only as conservators, not as parties to
    any contracts. Id.
    After the return of the case to the District Court the
    plaintiff States amended their complaint multiple times to add as
    plaintiffs officials of the States of Montana, Kentucky,
    Oklahoma, Missouri, and Pennsylvania, and to add claims that
    the Escheat Decision violated the Tenth Amendment11 and the
    notice and comment provisions of the APA contained in 5
    U.S.C. § 553.12 In November of 2008, the Government filed a
    11
    The Tenth Amendment provides that “[t]he powers not
    delegated to the United States by the Constitution, nor
    prohibited by it to the States, are reserved to the States
    respectively, or to the people.”
    12
    5 U.S.C. § 553 provides in relevant part:
    19
    motion to dismiss the fourth amended complaint, again
    contending that the District Court did not have jurisdiction but
    this time predicating that contention on an argument that the
    (b) General notice of proposed rule making shall
    be published in the Federal Register, unless
    persons subject thereto are named and either
    personally served or otherwise have actual notice
    thereof in accordance with law. . . .
    Except when notice or hearing is required by
    statute, this subsection does not apply—
    (A) to interpretative rules, general
    statements of policy, or rules of agency
    organization, procedure, or practice; or
    (B) when the agency for good cause finds
    (and incorporates the finding and a brief statement
    of reasons therefor in the rules issued) that
    notice and public procedure thereon are
    impracticable,        unnecessary, or contrary to
    the public interest.
    (c) After notice required by this section, the
    agency shall give interested persons an
    opportunity to participate in the rule making
    through submission of written data, views, or
    arguments with or without opportunity for oral
    presentation. . . .
    20
    United States had not waived sovereign immunity and thus the
    Federal Government could not be made a defendant in this
    action. The Government, however, did not contend that even if
    it did not enjoy sovereign immunity in this case the Court still
    would not have statutory jurisdiction under 28 U.S.C. § 1331 or
    any other statute. In the alternative, the Government sought
    summary judgment on the grounds of intergovernmental
    immunity and federal preemption of the States‟ unclaimed
    property acts.
    After oral argument, the District Court denied the
    Government‟s motion without prejudice, but granted it leave to
    file a motion to dismiss pursuant to Federal Rule of Civil
    Procedure 12(b). In July of 2009, the Government filed the
    ultimately successful motion to dismiss and obtained the order
    that the States challenge on this appeal.13 The Government
    argued that dismissal for lack of jurisdiction was warranted
    under Rule 12(b)(1) because the States had not established that
    the Government had waived sovereign immunity. Alternatively,
    the Government argued that dismissal was appropriate under
    Rule 12(b)(6) because federal law preempted the States‟
    13
    The Government addressed its motion to dismiss to the fourth
    amended complaint but after oral argument on the motion the
    States sought leave to amend the complaint to add the Treasurer
    of Pennsylvania as a plaintiff. The Government consented to the
    amendment, thus generating a fifth amended complaint.
    Because the fifth amended complaint was substantially the same
    as the fourth amended complaint, the District Court‟s opinion
    referenced the fourth amended complaint.
    21
    unclaimed property acts to the extent that the States sought to
    apply those acts in this case. The Government also contended
    that the doctrine of intergovernmental immunity barred the
    States‟ case and the case lacked merit insofar as the States based
    their claims on the Tenth Amendment and violations of the
    APA‟s notice and comment provisions.
    The District Court began its analysis with the
    Government‟s arguments on the merits under Rule 12(b)(6) even
    though “Article III [of the Constitution] generally requires a
    federal court to satisfy itself of its jurisdiction over the subject
    matter before it considers the merits of a case.”14 Ruhrgas AG
    v. Marathon Oil Co., 
    526 U.S. 574
    , 583, 
    119 S. Ct. 1563
    , 1569
    (1999). The District Court first addressed the issue of
    intergovernmental immunity, and concluded that the imposition
    of the States‟ escheat acts impermissibly would regulate the
    Federal Government by imposing potential civil and criminal
    penalties on the Government for failure to comply with the acts‟
    14
    In Steel Co. v. Citizens for a Better Environment, 
    523 U.S. 83
    , 
    118 S. Ct. 1003
     (1998), the Supreme Court disapproved of
    the practice that some courts of appeals, including this Court,
    had adopted of assuming “hypothetical jurisdiction” when
    facing difficult jurisdictional questions in situations in which the
    party entitled to prevail on the merits would be the same party
    prevailing if the court did not have jurisdiction. Id. at 93-94,
    118 S.Ct. at 1012. Under the rule of Steel Co., when a court
    lacks jurisdiction its “only function . . . is that of announcing the
    fact and dismissing the cause” as any further discussion would
    amount to an “advisory opinion.” Id. at 94, 101, 118 S.Ct. at
    1012, 1016.
    22
    record-keeping and reporting requirements, and would interfere
    with Congress‟s constitutional power, U.S. Const. art. IV, § 3,
    cl. 2, to “dispose of and make all needful Rules and Regulations
    respecting the . . . Property belonging to the United States.”
    App. at 28-30. The Court also observed that implementing the
    laws “could result in multiple obligations on the same bond by
    the United States,” id. at 30, because the respective States would
    be substituted as obligors on the bonds, while the Federal
    Government would remain contractually and statutorily
    obligated on the bonds to the original bondholder or his legal
    successors.
    Next, addressing preemption, the District Court held that
    the States‟ proposal for taking custody of the bonds pursuant to
    their escheat laws impermissibly would interfere with the
    contract between the bondholders and the United States, thus
    conflicting “with the narrow regulations governing redemption
    of the bonds.” Id. at 30-31. The Court also rejected the States‟
    Tenth Amendment reserved power claim that they had the right
    to enforce their unclaimed property acts to gain custody of the
    proceeds of the savings bonds. In this regard, the Court held
    because the States‟ acts had been preempted, Congress had not
    infringed the States‟ reserved powers by exercising powers not
    delegated to the United States. Finally, the Court held that the
    States‟ notice and comment claim failed because the Escheat
    Decision concerns government contracts and thus the Decision
    explicitly was exempt from the requirements of 5 U.S.C. §
    23
    553.15 See 5 U.S.C. § 553(a) (stating that “[t]his section applies
    . . . except to the extent there is involved . . . a matter relating to
    agency . . . contracts”). Alternatively, with respect to the States‟
    notice and comment claim the Court held that the Escheat
    Decision was an “interpretive rule” or “general statement[] of
    policy” not subject to the statute‟s requirements. See 5 U.S.C. §
    553(b)(A) (stating with exceptions not relevant here that the
    APA‟s notice provision does not apply to “interpretive rules,
    general statements of policy, or rules of agency organization,
    procedure, or practice”).
    15
    On this appeal, the States essentially do not challenge the
    District Court‟s ruling rejecting their 5 U.S.C. § 553 notice and
    comment argument, and therefore they have waived their right
    to contend that the Court erred in making that ruling. See FDIC
    v. Deglau, 
    207 F.3d 153
    , 169 (3d Cir. 2000). They indicate,
    however, in their brief that they contingently “do assert a claim
    under the APA concerning Treasury‟s failure to promulgate its
    Escheat Decision through notice and comment rulemaking or to
    publish it in the Federal Register . . . but [do so] simply to
    forestall any assertion by defendants that the Escheat Decision is
    agency action that preempts the States‟ cause of action under
    their escheat statutes.” Appellants‟ br. at 17 n.5. The
    Government, however, does not make that contention as it
    argues that federal constitutional provisions, laws, and duly
    adopted regulations preempt the States‟ unclaimed property acts.
    Obviously, the Escheat Decision has no preemptive effect as it
    merely is the Treasury‟s opinion as to the effect of those primary
    sources of law.
    24
    When it addressed the sovereign immunity and
    jurisdictional issues, the District Court concluded that the
    Escheat Decision and the Government‟s refusal to turn over the
    unclaimed bonds did not constitute “final agency action” subject
    to judicial review. See 5 U.S.C. § 704 (“Agency action made
    reviewable by statute and final agency action for which there is
    no other adequate remedy in a court are subject to judicial
    review. A preliminary, procedural, or intermediate agency
    action or ruling not directly reviewable is subject to review on
    the review of the final agency action.”).16 On February 5, 2010,
    the Court entered an order dismissing this action. This appeal
    followed.
    III.   JURISDICTION AND STANDARD OF REVIEW
    The question of whether the District Court had
    jurisdiction is at issue in this appeal. Accordingly, we will
    address its jurisdiction in our discussion below. We have
    appellate jurisdiction under 28 U.S.C. § 1291.
    Our review of the dismissal in this case involving a facial
    challenge to the District Court‟s jurisdiction is plenary. In re
    16
    The District Court did not specify whether it based its
    decision to dismiss the case on the merits pursuant to Rule
    12(b)(6) or on its lack of jurisdiction under Rule 12(b)(1). As
    we discuss below, regardless of the District Court‟s intent we
    affirm its dismissal on the basis of Rule 12(b)(6) as we are
    satisfied that it had jurisdiction.
    25
    Kaiser Grp. Int‟l Inc., 
    399 F.3d 558
    , 561 (3d Cir. 2005). Thus,
    in our jurisdictional determination we “accept all [the] well-
    pleaded allegations in the complaint as true and view them in the
    light most favorable to the [States].” Id.
    We exercise plenary review of the District Court‟s order
    granting the Government‟s motion to dismiss under Rule
    12(b)(6) for failure to state a claim. See Allen ex rel. Martin v.
    LaSalle Bank, N.A., 
    629 F.3d 364
    , 367 (3d Cir. 2011).
    Similarly, as in our jurisdictional review, in reviewing the
    dismissal under Rule 12(b)(6), “we accept all factual allegations
    as true [and] construe the complaint in the light most favorable
    to the [States].” Warren Gen. Hosp. v. Amgen Inc., 
    643 F.3d 77
    , 84 (3d Cir. 2011) (quoting Pinker v. Roche Holdings, Ltd.,
    
    292 F.3d 361
    , 374 n.7 (3d Cir. 2002)). A court may grant a
    motion to dismiss under Rule 12(b)(6) “only if, accepting all
    well-pleaded allegations in the complaint as true and viewing
    them in the light most favorable to the plaintiff, [it] finds that [a]
    plaintiff‟s claims lack facial plausibility.” Id. (citing Bell Atl.
    Corp. v. Twombly, 
    550 U.S. 544
    , 555-56, 
    127 S. Ct. 1955
    , 1964-
    65 (2007)).
    IV.     DISCUSSION
    A.      Subject Matter Jurisdiction
    Without a waiver of sovereign immunity, a court is
    without subject matter jurisdiction over claims against federal
    agencies or officials in their official capacities. United States v.
    26
    Mitchell, 
    445 U.S. 535
    , 538, 
    100 S. Ct. 1349
    , 1351 (1980) (“The
    United States, as sovereign, is immune from suit save as it
    consents to be sued.”) (alteration and citation omitted). A
    waiver of sovereign immunity must be express and
    unambiguous to confer subject matter jurisdiction on a court.
    United States v. Bein, 
    214 F.3d 408
    , 412 (3d Cir. 2000). As the
    Supreme Court said in United States v. United States Fidelity &
    Guaranty Co., 
    309 U.S. 506
    , 514, 
    60 S. Ct. 653
    , 657 (1940),
    “[c]onsent alone gives jurisdiction to adjudge against a
    sovereign. Absent that consent, the attempted exercise of
    judicial power is void.” Moreover, as the Court also has
    explained “a waiver of sovereign immunity must be strictly
    construed in favor of the sovereign,” Orff v. United States, 
    545 U.S. 596
    , 601-02, 
    125 S. Ct. 2606
    , 2610 (2005), and “[t]he terms
    of [the] waiver define the extent of the court‟s jurisdiction.”
    United States v. Mottaz, 
    476 U.S. 834
    , 841, 
    106 S. Ct. 2224
    ,
    2229 (1986) (citation omitted).
    The States initially argue that the proposed application of
    their respective unclaimed property acts to the savings bonds or
    their proceeds does not implicate sovereign immunity because it
    does not create a context in which the Federal Defendants might
    be able to assert their sovereign immunity. The States predicate
    this argument on the circumstance that the United States does
    not assert an ownership interest in the proceeds of the unclaimed
    bonds or in the bonds themselves. We, however, conclude that
    this argument lacks merit. In rejecting the States‟ argument we
    note that we have observed, rather unsurprisingly, that
    “sovereign immunity is implicated” when “a plaintiff [is] suing
    the United States.” Scheafnocker v. Comm‟r, 
    642 F.3d 428
    , 433
    n.8 (3d Cir. 2011) (citing Becton Dickinson and Co. v.
    27
    Wolckenhauer, 
    215 F.3d 340
    , 345 (3d Cir. 2000)); see S. Delta
    Water Agency v. U.S. Dep‟t of Interior, 
    767 F.2d 531
    , 536 (9th
    Cir. 1985) (noting that “[f]ederal agencies and instrumentalities,
    as well as federal employees acting in their official capacities
    within their authority are [also] immune from suit” absent a
    congressional waiver of sovereign immunity) (citation omitted).
    The States next assert that even if sovereign immunity is
    implicated in this case, the APA provides for its waiver. We
    agree with the States‟ APA argument and thus hold that the
    District Court erred to the extent it relied on sovereign immunity
    to dismiss the case under Rule 12(b)(1). In considering
    sovereign immunity we initially observe that the APA “sets forth
    the procedures by which federal agencies are accountable to the
    public and their actions subject to review by the courts.”
    Franklin v. Massachusetts, 
    505 U.S. 788
    , 796, 
    112 S. Ct. 2767
    ,
    2773 (1992). Thus, the APA in 5 U.S.C. § 702 provides in
    relevant part:
    A person suffering legal wrong because of agency
    action, or adversely affected or aggrieved by
    agency action within the meaning of a relevant
    statute, is entitled to judicial review thereof. An
    action in a court of the United States seeking
    relief other than money damages and stating a
    claim that an agency or an officer or employee
    thereof acted or failed to act in an official capacity
    or under color of legal authority shall not be
    dismissed nor relief therein be denied on the
    ground that it is against the United States or that
    the United States is an indispensable party.
    28
    The second sentence of the above portion of section 702 had its
    origin in the 1976 amendments to the APA by which Congress
    sought to “remove three technical barriers to the consideration
    on the merits of citizens‟ complaints against the Federal
    Government, its agencies, or employees.” H.R. Rep. No. 94-
    1656, at 3 (1976), reprinted in 1976 U.S.C.C.A.N. 6121, 6123.
    A key “technical barrier” that Congress removed was “the
    defense of sovereign immunity as a bar to judicial review of
    Federal administrative action otherwise subject to judicial
    review.” 5 U.S.C. § 702, Historical and Statutory Notes. The
    Supreme Court subsequently clarified that “it is undisputed that
    the 1976 amendment to § 702 was intended to broaden the
    avenues for judicial review of agency action by eliminating the
    defense of sovereign immunity in cases covered by the
    amendment.” Bowen v. Massachusetts, 
    487 U.S. 879
    , 891-92,
    
    108 S. Ct. 2722
    , 2731 (1988). Thus, section 702 “provides both
    a waiver of sovereign immunity and a right of judicial review.”
    NVE, Inc. v. Dep‟t of Health and Human Servs., 
    436 F.3d 182
    ,
    189 (3d Cir. 2006).
    The States now contend that the District Court erred in
    holding that the scope of the waiver of sovereign immunity
    under section 702 is limited to “final agency action.”17 The
    17
    The States took the position before the District Court that if a
    waiver of sovereign immunity was necessary, the Escheat
    Decision would have to have been “final agency action” for it to
    be reviewable under the APA. That contention is inconsistent
    with their position on this appeal. The States complain that the
    District Court “severely limited discovery to the issues of
    ripeness and whether Treasury‟s policy on escheat constituted
    29
    APA in 5 U.S.C. § 704 sets forth limitations on the type of
    agency actions reviewable under the APA, as it provides that
    “[a]gency action made reviewable by statute and final agency
    action for which there is no other adequate remedy in a court are
    subject to judicial review. A preliminary, procedural, or
    intermediate agency action or ruling not directly reviewable is
    subject to review on the review of the final agency action.” See
    5 U.S.C. § 551(13) (“„agency action‟ includes the whole or a
    part of an agency rule, order, license, sanction, relief, or the
    equivalent or denial thereof, or failure to act”). The District
    Court concluded that because the Escheat Decision was not
    reviewable by statute and was not a “final agency action,”
    section 702 did not waive sovereign immunity in this case.
    But the District Court‟s conclusion was at odds with
    opinions of several courts of appeals that have clarified that the
    waiver of sovereign immunity in section 702 extends to all non-
    monetary claims against federal agencies and their officers,
    regardless of whether or not the cases seek review of “agency
    action” or “final agency action” as set forth in section 704. For
    example, in Trudeau v. Federal Trade Commission, 
    456 F.3d 178
    , 187 (D.C. Cir. 2006), the United States Court of Appeals
    for the District of Columbia Circuit held that section 702‟s
    final agency action,” Appellants‟ reply br. at 2, and assert that
    broader discovery would have been useful on the issues of
    “whether escheat of unclaimed bonds would interfere with the
    administration of the federal bond program, or subject Treasury
    to double liability, or confuse bondholders.” Id. at 2-3. They,
    however, do not ask us to reverse because of the Court‟s
    limitation on discovery.
    30
    waiver of sovereign immunity “is not limited to APA cases” and
    applies “regardless of whether the elements of an APA cause of
    action are satisfied.” In Trudeau, the Federal Trade Commission
    (“FTC”) issued what the plaintiff alleged was a false and
    misleading press release about his business activities. The
    plaintiff asserted that the FTC violated his rights under the First
    Amendment and he was entitled to relief under 5 U.S.C. § 706,
    which provides that a reviewing court may set aside agency
    action found to be “in excess of statutory jurisdiction, authority,
    or limitations.” Id. at 188. The district court dismissed the
    complaint for lack of subject matter jurisdiction because the
    press release was not “final agency action” under section 704.
    Id. at 182. The court of appeals in reversing held that even
    though the plaintiff‟s claims failed on the merits that
    circumstance made no difference for jurisdictional purposes
    because regardless of whether the FTC press release constituted
    a “final agency action” the District Court had jurisdiction. In
    reaching its conclusion, the court of appeals cited the Senate
    Report accompanying the 1976 APA amendments, which
    indicated that section 702‟s partial waiver of sovereign
    immunity extended to nonstatutory review18 of federal
    administrative action, and thus included the plaintiff‟s claims
    even if he had not made them under the APA. Id. at 187 (citing
    S. Rep. No. 94-996, at 8 (1976) reprinted in 1976 U.S.C.C.A.N.
    6121, 6129).
    In its opinion the Trudeau court dealt with the first
    18
    Such lawsuits “are called „nonstatutory‟ because they are not
    brought under the statutes that specially provide for review of
    agency action.” Jaffee, 592 F.2d at 719 n.12.
    31
    sentence of section 702 which reads, “[a] person suffering legal
    wrong because of agency action . . . is entitled to judicial review
    thereof,” but then emphasized that the statute‟s waiver of
    sovereign immunity was in the second sentence of section 702
    which reads:
    An action in a court of the United States seeking
    relief other than money damages and stating a
    claim that an agency or an officer or employee
    thereof acted or failed to act in an official capacity
    or under color of legal authority shall not be
    dismissed nor relief therein be denied on the
    ground that it is against the United States or that
    the United States is an indispensable party.
    Id. at 185. The court of appeals emphasized that while
    the second sentence refers to a claim against an
    “agency,” and thus carries that limitation to the scope of
    the waiver of sovereign immunity, the sentence does not
    use the terms “agency action” or “final agency action.”
    Furthermore, the court of appeals observed that the
    House and Senate Reports accompanying the 1976
    amendments reflected Congress‟s intent to waive
    immunity for “any” and ”all” actions for non-monetary
    relief against an agency. Id. at 187 (citing H.R. Rep. No.
    94-1656, at 3, S. Rep. No. 94-996, at 8, reprinted in 1976
    U.S.C.C.A.N. at 6129). In sum, the court of appeals held
    that section 704‟s “final agency action” requirement only
    limited the viability of claims made under the APA, and
    because section 702 operated as a waiver for all non-
    monetary claims, including those claims not made under
    32
    the APA, section 704 did not limit section 702‟s waiver
    of sovereign immunity.
    The Court of Appeals for the Ninth Circuit recently
    agreed with Trudeau that section 702‟s waiver of sovereign
    immunity is not limited to actions brought under the APA. In
    Veterans for Common Sense v. Shinseki, 
    644 F.3d 845
     (9th Cir.
    2011), a veterans‟ group claimed that the Department of
    Veterans Affairs‟ dilatory processing of mental health claims
    violated the veterans‟ constitutional right to benefits. Id. at 860-
    61. In Veterans for Common Sense the district court held that
    the “final agency action” limitation in section 704 restricted the
    waiver of sovereign immunity in section 702, and inasmuch as
    the delays in processing claims did not constitute “final agency
    action,” section 702 did not waive sovereign immunity. Id. at
    863. The court of appeals reversed, concurring with Trudeau
    and holding that the first sentence of section 702 referred to a
    cause of action created by the APA, and not any jurisdictional
    limitation. Id. at 866 (“The first and second sentences of § 702
    play quite different roles.”). Therefore, the court of appeals held
    that section 702 waived sovereign immunity for purposes of the
    plaintiff‟s request for injunctive relief based on the Constitution,
    even if judicial review did not involve “agency action” under
    section 704.
    The Veterans for Common Sense court relied on its
    earlier decision in Presbyterian Church (U.S.A.) v. United
    States, 
    870 F.2d 518
     (9th Cir. 1989), where the plaintiffs alleged
    that there had been First and Fourth Amendment violations
    when federal agencies secretly recorded church services. There,
    the court of appeals noted that while the original 1946 form of
    33
    section 702, which contained the first but not second sentence,
    may have limited judicial review to “agency action,” the 1976
    amendments, which added the second sentence, reflected an
    “unqualified waiver of sovereign immunity in actions seeking
    nonmonetary relief against legal wrongs for which governmental
    agencies are accountable,” and “[n]othing in the language of the
    amendment suggests that the waiver of sovereign immunity is
    limited to claims challenging conduct falling in the narrow
    definition of „agency action.‟” Id. at 525.
    Other courts of appeals have taken the same position as
    the Trudeau and Veterans for Common Sense courts. In Delano
    Farms Co. v. California Table Grape Commission, 
    655 F.3d 1337
    , 1344 (Fed. Cir. 2011), the Court of Appeals for the
    Federal Circuit held that grape growers could maintain a patent
    claim against the United States Department of Agriculture for
    declaratory relief because section 702 applied broadly to waive
    sovereign immunity for all claims not seeking money damages.
    The Courts of Appeals for the Seventh and First Circuits have
    viewed the waiver of sovereign immunity in the second sentence
    of section 702 similarly. See Michigan v. U.S. Army Corps of
    Eng‟rs, 
    667 F.3d 765
    , 775 (7th Cir. 2011) (“the conditions of §
    704 affect the right of action contained in the first sentence of §
    702, but they do not limit the waiver of immunity in § 702‟s
    second sentence”) (citing Veterans for Common Sense, 644 F.3d
    at 866-68); Blagojevich v. Gates, 
    519 F.3d 370
    , 372 (7th Cir.
    2008) (holding that section 702 waives immunity for a lawsuit
    by a state governor alleging that the Department of Defense
    violated a statute requiring the governor‟s approval before
    moving a national guard unit from the state); Puerto Rico v.
    United States, 
    490 F.3d 50
    , 57-58 (1st Cir. 2007) (holding that
    34
    section 702 encompasses all actions for specific relief against a
    federal agency or its officers).
    Although we acknowledge that section 702 is not a model
    of clarity, our independent review of our precedents and the
    statute‟s legislative history leads us to agree with the position
    taken by the courts of appeals in the opinions to which we have
    referred. In Specter v. Garrett, 
    995 F.2d 404
     (3d Cir. 1993),
    rev‟d on other grounds sub nom. Dalton v. Specter, 
    511 U.S. 462
    , 
    114 S. Ct. 1719
     (1994), we held that an action seeking an
    order enjoining the Secretary of the Navy from closing a naval
    shipyard could proceed under the Defense Base Closure and
    Realignment Act of 1990 despite the defendants‟ invocation of
    sovereign immunity, stating that “the waiver of sovereign
    immunity contained in § 702 is not limited to suits brought
    under the APA.” Id. at 410. Although we did not address
    directly whether section 704 operates as a limitation on section
    702‟s waiver of sovereign immunity, we recently clarified that
    the judicial review provisions of the APA such as section 704,
    are not jurisdictional, but rather “provide a limited cause of
    action for parties adversely affected by agency action.”
    Chehazeh v. Attorney Gen. of the United States, 
    666 F.3d 118
    ,
    125 n.11 (3d Cir. 2012) (quoting Oryszak v. Sullivan, 
    576 F.3d 522
    , 525 (D.C. Cir. 2009)). “Thus, if agency action is . . . not
    final agency action, 5 U.S.C. § 704, a plaintiff who challenges
    such an action cannot state a claim under the APA . . . and the
    action must be dismissed.” Id. (citing Oryszak, 576 F.3d at 525)
    (internal quotation marks omitted).
    The House of Representatives Report accompanying the
    1976 amendments confirms that Congress contemplated that the
    35
    amendments would implement a broad waiver of sovereign
    immunity. As stated above, prior to the amendments section
    702 contained the first sentence, which provided that a person
    aggrieved by agency action within the meaning of a relevant
    statute is entitled to judicial review, but it did not contain the
    second sentence. Thus, in 1976 when Congress added the
    second sentence it did so for the specific purpose of waiving
    sovereign immunity. See H.R. Rep. No. 94-1656, at 1, reprinted
    in 1976 U.S.C.C.A.N. at 6121. The House Report, however,
    explained that the second sentence of section 702, providing that
    a federal agency and its officers could be named as defendants
    in non-monetary actions, was subject to limitations. First, the
    amendment only waives sovereign immunity for actions in a
    federal court; second, such actions must seek non-monetary
    relief; and third, it is “applicable only to functions falling within
    the definition of „agency‟ in 5 U.S.C. section 701.” Id. at 11,
    reprinted in 1976 U.S.C.C.A.N. at 6131.
    But the House Report does not state that there is a fourth
    limitation limiting the waiver of sovereign immunity in section
    702 to suits challenging “agency action” as defined in the APA.
    Rather, the Report indicates that “[t]he amendment made to
    section 702 of title 5 would eliminate the defense of sovereign
    immunity in any action in a federal court seeking relief other
    than money damages and stating a claim based on the assertion
    of unlawful official action by an agency or by an officer or
    employee of that agency.” Id. at 3, reprinted in 1976
    U.S.C.C.A.N. at 6123 (emphasis added); see id. at 9, 1976
    U.S.C.C.A.N. at 6129 (“[T]he time now [has] come to eliminate
    the sovereign immunity defense in all equitable actions for
    specific relief against a Federal agency or officer acting in an
    36
    official capacity.”) (emphasis added.). Accordingly, section 704
    in limiting review to “final agency action” concerns whether a
    plaintiff has a cause of action under the APA that can survive a
    motion to dismiss under Rule 12(b)(6) but does not provide a
    basis for dismissal on grounds of sovereign immunity.19 Here,
    of course, the States seek equitable relief and not monetary
    damages and accordingly, the Government‟s sovereign
    immunity from this action has been waived.20
    19
    The Government contends that the waiver of sovereign
    immunity should be limited to actions brought under federal law
    rather than state law as the States have done here to the extent
    that they seek relief under their unclaimed property acts.
    Though in view of the circumstance that most cases against the
    Government are under federal law so that Congress probably
    was focused on that law when it adopted the 1976 amendments
    to the APA, we see no support for the distinction that the
    Government makes between federal and state law in either the
    text or the history of section 702.
    20
    We emphasize here that although in this action the States seek
    to recover a very large sum of money, this action does not seek
    “money damages” within the meaning of section 702. In
    Bowen, 
    487 U.S. 879
    , 
    108 S. Ct. 2722
    , the State of
    Massachusetts sued the Secretary of Health and Human Services
    in order to enforce a provision of the Medicaid statute requiring
    that the Federal Government reimburse it for certain Medicaid
    expenditures that it had made. The Court held that section 702
    waived sovereign immunity in that case even though
    Massachusetts sought to make a monetary recovery from the
    37
    Although the defense of sovereign immunity raises a
    claim constituting a jurisdictional limitation, even if, as we now
    hold here, the defense is unsuccessful, the court in which the
    plaintiff has brought the action cannot entertain the case unless
    it has jurisdiction under Article III of the Constitution and the
    statutes that Congress has adopted providing a federal court with
    jurisdiction over the case. Accordingly, as distinct from its
    arguments that the States‟ lawsuit does not fall within the APA‟s
    waiver of sovereign immunity, the Government now contends
    Federal Government, observing that “[o]ur cases have long
    recognized the distinction between an action at law for damages
    — which are intended to provide a victim with monetary
    compensation for an injury to his person, property, or reputation
    — and an equitable action for specific relief — which may
    include an order providing for the reinstatement of an employee
    with backpay, or for „the recovery of specific property or
    monies, ejectment from land, or injunction either directing or
    restraining the defendant officer‟s actions.‟ Larson v. Domestic
    & Foreign Commerce Corp., 
    337 U.S. 682
    , 688, 
    69 S. Ct. 1457
    ,
    1460 (1949) (emphasis added)).” Id. at 893, 108 S.Ct. at 2732;
    see id. at 895, 108 S.Ct. at 2732 (explaining that “[d]amages are
    given to the plaintiff to substitute for a suffered loss, whereas
    specific remedies are not substitute remedies at all, but attempt
    to give the plaintiff the very thing to which he was entitled.”
    (citation and internal quotation marks omitted)). Accordingly,
    the Court held that “[t]he fact that a judicial remedy may require
    one party to pay money to another is not a sufficient reason to
    characterize the relief as „money damages.‟” Id. at 893, 108
    S.Ct. at 2732.
    38
    — even though it did not advance this point in the District Court
    — that the District Court lacked an independent basis for federal
    question jurisdiction because the States are making claims under
    state, not federal law. Thus, the Government contends that the
    District Court did not have jurisdiction over the States‟ action
    under 28 U.S.C. § 1331 or, indeed, under any other statute.21
    Although we sometimes have referred to the APA as conferring
    “jurisdiction,” see, e.g., Pinho v. Gonzales, 
    432 F.3d 193
    , 200
    (3d Cir. 2005), the Supreme Court has stated that “the APA does
    not afford an implied grant of subject-matter jurisdiction
    permitting federal judicial review of agency action.” Califano v.
    Sanders, 
    430 U.S. 99
    , 107, 
    97 S. Ct. 980
    , 985 (1977).
    Accordingly, we have recognized that ordinarily “the „federal
    question‟ statute, 28 U.S.C. § 1331, „confer[s] jurisdiction on
    federal courts to review agency action.‟” Chehazeh, 666 F.3d at
    125 n.11 (quoting Califano, 430 U.S. at 105, 97 S.Ct. at 984).
    See Chrysler Corp. v. Brown, 
    441 U.S. 281
    , 317 n.47, 
    99 S. Ct. 1705
    , 1725 n.47 (1979) (“Jurisdiction to review agency action is
    found in 28 U.S.C. § 1331.”); Jaffee v. United States, 
    592 F.2d 712
    , 718 (3d Cir. 1979) (“[S]ection 702, when it applies, waives
    sovereign immunity in „nonstatutory‟ review of agency action
    under section 1331.”) (emphasis added).
    We thus must decide whether the States‟ claims arise
    21
    Of course, inasmuch as we must assure ourselves that the
    District Court had subject matter jurisdiction the Government
    may assert this jurisdictional argument initially on this appeal.
    See Arizonans for Official English v. Arizona, 
    520 U.S. 43
    , 73,
    
    117 S. Ct. 1055
    , 1071-72 (1997).
    39
    “under the Constitution, laws, or treaties of the United States,”
    so that the District Court had jurisdiction pursuant to 28 U.S.C.
    § 1331, or whether the Court had jurisdiction pursuant to
    another statute. See Trudeau, 456 F.3d at 185 (“[B]ecause the
    APA neither confers nor restricts jurisdiction, we must still
    determine whether some other statute provides it.”). See
    Alvarado v. Table Mountain Rancheria, 
    509 F.3d 1008
    , 1016
    (9th Cir. 2007) (“To confer subject matter jurisdiction in an
    action against a sovereign, in addition to a waiver of sovereign
    immunity, there must be statutory authority vesting a district
    court with subject matter jurisdiction.”). In considering the
    federal jurisdiction question we recognize that it might be
    thought that inasmuch as the States are attempting to enforce
    their unclaimed property acts in this action, this case could not
    be within federal jurisdiction under 28 U.S.C. § 1331.
    Even though the States have brought this action with the
    intent ultimately to obtain relief under their laws there is no
    escape from the fact that this case largely involves the
    Government‟s claim that federal statutes and regulations
    preempt the States‟ unclaimed property acts. That circumstance
    compels us to consider the long established well-pleaded
    complaint rule to the end that “federal courts have federal
    question jurisdiction only when a federal claim appears in the
    complaint, and not when a federal preemption defense may
    eventually be raised in litigation.” Levine v. United Healthcare
    Corp., 
    402 F.3d 156
    , 162 (3d Cir. 2005) (citation omitted). Yet
    the States not unreasonably cite Grable & Sons Metal Products,
    Inc. v. Darue Engineering and Manufacturing, 
    545 U.S. 308
    ,
    
    125 S. Ct. 2363
     (2005), as support for their contention that the
    District Court did have jurisdiction. It is true that aspects of
    40
    Grable read in isolation seem to support the States‟ jurisdictional
    contention with respect to the preemption issues in this case for
    this case raises and, indeed, is about, in the words of Grable,
    “significant federal issues.” Grable, 545 U.S. at 312, 125 S.Ct.
    at 2367. Moreover, the state law claims being advanced here
    under the States‟ unclaimed property acts, in the words of
    Supreme Court jurisprudence even before Grable, “depend[ ]
    upon the construction or application of [federal law].” Smith v.
    Kansas City Title & Trust Co., 
    255 U.S. 180
    , 199, 
    41 S. Ct. 243
    ,
    245 (1921).22 Furthermore, this case is a direct action against
    the Government and thus differs from the ordinary preemption
    case in which a private defendant relies on federal law as a
    defense to a state cause of action. See, e.g., PLIVA, Inc. v.
    Mensing, 
    131 S. Ct. 2557
    , 2577-78 (2011). Indeed, we cannot
    help but wonder whether the States could have cast this case as a
    declaratory judgment action seeking a declaration that a
    judgment obtained in a proceeding under their unclaimed
    property acts would be enforceable against the Federal
    Government with respect to the proceeds of matured but
    unredeemed savings bonds.23
    22
    The dominance of federal law in this case is highlighted in the
    States‟ brief in which they correctly point out that the “United
    States does not dispute that the States‟ unclaimed property laws
    require unclaimed savings bonds to be turned over to state
    custody pending location of the absent owners. The question on
    the merits is thus whether federal law somehow preempts the
    operation of these escheat laws.” Appellants‟ br. at 22.
    23
    In this regard, we note that the Supreme Court indicated in
    41
    Grable, however, insofar as the States advance it as
    support for their jurisdictional contentions, has its limitations.
    In Grable a federal taxpayer brought an action to quiet title in a
    state court against a purchaser of the property who acquired the
    property by a quitclaim deed from the Government. The
    Government sold the property to the purchaser to satisfy the
    taxpayer‟s tax delinquency. In the quiet title action the taxpayer
    asserted that the purchaser‟s title was invalid because the
    Government did not follow proper procedure in giving required
    notice when seizing the property. The purchaser removed the
    case to a federal court claiming that there was federal question
    jurisdiction even though the plaintiff-taxpayer sought to quiet
    title to its property in a state court, a classic state law procedure,
    and even though there was no suggestion in the case that there
    was diversity of citizenship between the parties. The taxpayer
    moved to remand the case to state court but the district court
    denied the motion and the court of appeals affirmed. The
    Supreme Court granted certiorari and affirmed.
    The Supreme Court held that there was federal question
    jurisdiction in Grable principally because of the dominance of
    Bowen, 487 U.S. at 893, 108 S.Ct. at 2731, that the 1976
    amendment referring to relief other than money damages “does
    not foreclose judicial review of the actions brought by the State
    challenging the Secretary‟s disallowance decisions.” The Court
    first noted that “insofar as the complaints sought declaratory and
    injunctive relief, they were certainly not actions for money
    damages.” The Court went on to state that “even the monetary
    aspects of the relief that the State sought are not „money
    damages‟ as that term is used in the law.”
    42
    significant federal issues in that case. But as the Court of
    Appeals for the Ninth Circuit said in California Schock Trauma
    Air Rescue v. State Compensation Insurance Fund, 
    636 F.3d 538
    , 542 (9th Cir. 2011), “the Grable complaint did present a
    federal issue on its face” with respect to the Internal Revenue
    Service not following proper procedures in the seizure of the
    taxpayer‟s property. Therefore, the court of appeals understood
    Grable to uphold the assertion of federal jurisdiction because the
    complaint “satisfie[d] both the well-pleaded complaint rule and
    passe[d] the implicates significant federal issues test.” Id.
    (internal quotation marks and brackets omitted). We also are
    aware that the Supreme Court itself in Empire Healthcare
    Assurance, Inc. v. McVeigh, 
    547 U.S. 677
    , 699, 
    126 S. Ct. 2121
    ,
    2136 (2006), emphasized the limitations of Grable when it
    indicated that Grable dealt with a “special and small category”
    of cases that qualify for federal question jurisdiction.
    In the end, however, we do not find it necessary to decide
    whether the District Court had jurisdiction by reason of the
    presence of the preemption issue in this case. We bypass the
    preemption jurisdictional question because it is clear that the
    Court had jurisdiction in light of the States having advanced a
    significant Tenth Amendment claim in their complaint which
    seeks relief on the basis of the “Treasury‟s Escheat Decision
    [having] violate[d] the Tenth Amendment of the United States
    Constitution.” App. at 109. In considering the effect of this
    claim with respect to federal jurisdiction we start from the
    unquestioned principle that jurisdiction lies under 28 U.S.C. §
    1331 when a cause of action arises under federal law on the
    basis of the plaintiff having made a claim under the Tenth
    Amendment. As the court of appeals indicated in Bolden v. City
    43
    of Mobile, 
    571 F.2d 238
    , 247 (5th Cir. 1978), rev‟d on other
    grounds, City of Mobile v. Bolden, 
    446 U.S. 55
    , 
    100 S. Ct. 1490
    (1980):
    The abuse of local governmental power, when of
    the constitutional magnitude in this case, is a
    power denied the States by the Constitution
    within the meaning of the tenth amendment. The
    power to remedy the unconstitutional wrong is
    one delegated to the United States by the
    Constitution. The Constitution expressly provides
    for federal court jurisdiction in claims arising
    under this Constitution (or) Laws of the United
    States. U.S. Const. art. 3, § 2. Congress has
    given the federal courts original jurisdiction over
    such claims. 28 U.S.C. § 1331.
    Id. (internal quotation marks omitted); see also Hodges v.
    Shalala, 
    121 F. Supp. 2d 854
    , 863-64 (D.S.C. 2000) (federal
    question jurisdiction exists under section 1331 in action in
    which state contends that Congress overstepped boundaries of
    the Tenth Amendment and the Spending Clause when it
    statutorily attached certain conditions to states‟ receipt of federal
    funding).
    The Supreme Court at one time regarded the Tenth
    Amendment as little more than a tautology that could not
    support a cause of action:
    The amendment states but a truism that all is
    retained which has not been surrendered. There is
    44
    nothing in the history of its adoption to suggest
    that it was more than declaratory of the
    relationship between the national and state
    governments as it had been established by the
    Constitution before the amendment or that its
    purpose was other than to allay fears that the new
    national government might seek to exercise
    powers not granted, and that the states might not
    be able to exercise fully their reserved powers.
    United States v. Darby, 
    312 U.S. 100
    , 124, 
    61 S. Ct. 451
    , 462
    (1941).
    More recently, however, the Court has embraced the view
    that the states may invoke the Tenth Amendment as a basis for
    invalidating federal action. Most notably, in New York v.
    United States, 
    505 U.S. 144
    , 
    112 S. Ct. 2408
     (1992), the Court
    invalidated under the Tenth Amendment portions of a federal
    law concerning disposal of radioactive waste. The origin of that
    case may be traced to Congress having reacted to a shortage of
    suitable radioactive waste disposal sites by passing the Low-
    Level Radioactive Waste Policy Amendments Act of 1985. The
    1985 statute imposed responsibility on the states to dispose of
    waste within their borders, including a requirement that states
    “take title” to waste not disposed of as of 1996 and that these
    states would be liable for damages incurred by their failure to
    take possession of that waste. Id. at 153-54, 112 S.Ct. at 2416.
    The Court held that the “take title” provisions of the law were
    unconstitutional because by forcing states to take ownership of
    the waste the law impermissibly would “commandeer” state
    governments contrary to the Tenth Amendment. The Court
    45
    believed that this attempted exercise of federal power exceeded
    Congress‟s powers under Article I of the Constitution. In
    reaching its result the Court stated that “[t]he Federal
    Government may not compel the States to enact or administer a
    federal regulatory program,” id. at 188, 112 S.Ct. at 2435,
    because doing so would limit state government accountability,
    as state governments forced to implement a federal program
    would be held responsible for decisions they did not make.
    The Supreme Court in New York v. United States
    rejected the reasoning of Darby and, rather than regarding the
    Tenth Amendment as a mere tautology as it had done in Darby,
    “direct[ed] [courts] to determine . . . whether an incident of state
    sovereignty is protected by a limitation on [congressional]
    power.” Id. at 157, 112 S.Ct. at 2418. As in New York v.
    United States, the States in this case claim that Congress is
    asserting a power that it does not have — a de facto federal
    escheat power — that is an affront to a state sovereign
    prerogative: to take custody to property it deems “unclaimed” or
    “abandoned” within its borders.
    Of course, a court makes a different analysis when
    determining if it has jurisdiction over a claim than it makes
    when considering the merits of the claim. As the Supreme
    Court has stated, “[d]ismissal for lack of subject-matter
    jurisdiction because of the inadequacy of the federal claim is
    proper only when the claim is so insubstantial, implausible,
    foreclosed by prior decisions of [the Supreme] Court, or
    otherwise completely devoid of merit as not to involve a federal
    controversy.” Steel Co. v. Citizens for a Better Env‟t, 
    523 U.S. 83
    , 89, 
    118 S. Ct. 1003
    , 1010 (1998) (internal quotation marks
    46
    and citation omitted). While, as we discuss below, we do not
    find that the States‟ Tenth Amendment claim is meritorious, in
    light of developing Tenth Amendment law the claim surely is
    colorable and not frivolous. Accordingly, the District Court had
    jurisdiction because “[it] is firmly established . . . that the
    absence of a valid (as opposed to arguable) cause of action does
    not implicate subject-matter jurisdiction, i.e., the courts‟
    statutory or constitutional power to adjudicate the case.” Id.
    Inasmuch as the District Court had jurisdiction under 28
    U.S.C. § 1331 over the States‟ Tenth Amendment claim, by
    reason of 28 U.S.C. § 1367 it had jurisdiction over the States‟
    entire complaint. Section 1367 provides, with inapplicable
    exceptions, if “the district courts have original jurisdiction,
    [they] shall have supplemental jurisdiction over all other claims
    that are so related to claims in the action within such original
    jurisdiction that they form part of the same case or controversy
    under Article III of the United States Constitution.” Here it is
    clear that all of the States‟ claims are related to their claim under
    the Tenth Amendment. In this regard, we point out that in the
    introduction to their complaint the States assert that “Treasury‟s
    refusal to comply with state laws governing unclaimed property
    usurps sovereign power exercised by the states since the
    Declaration of Independence, and reserved to the states under
    the Tenth Amendment of the U.S. Constitution.” App. at 88.
    The Supreme Court in City of Chicago v. International
    College of Surgeons, 
    522 U.S. 156
    , 164-65, 
    118 S. Ct. 523
    , 529
    (1997), indicated that a district court may exercise supplemental
    jurisdiction if the case before it involves claims “derive[d] from
    a common nucleus of operative fact such that the relationship
    47
    between the federal claim and the state claim permits the
    conclusion that the entire action before the court comprises but
    one constitutional claim.” (internal quotation marks and
    brackets omitted). This case fits within that criterion because
    the States in this action have a single goal, i.e., to obtain a
    judgment requiring that the Government remit to them and
    account for the proceeds of matured but unredeemed savings
    bonds.24
    24
    The States also assert that the Mandamus and Venue Act, 28
    U.S.C. § 1361, and 28 U.S.C. § 1346 (containing the Little
    Tucker Act and the Federal Tort Claims Act), provide for
    federal jurisdiction here but we do not decide whether either
    statute would confer jurisdiction in light of our conclusion that
    the District Court had jurisdiction by reason of the States‟ Tenth
    Amendment claim under 28 U.S.C. § 1331 and 28 U.S.C. §
    1367.
    Though we do not predicate our result on this point we note
    that if the District Court could not exercise jurisdiction in this
    case it well may be that there would not be any court in which
    plaintiff States could have brought their claims against the
    Federal Defendants under their unclaimed property acts. After
    all, the New Jersey state courts are well aware that section 702
    “does not waive sovereign immunity in actions in a state court”
    and thus they would not entertain an action seeking an order
    enjoining the Securities and Exchange Commission from
    prosecuting an administrative complaint against the plaintiff in
    the state court action. First Jersey Secs., Inc. v. Sec. Exch.
    Comm‟n, 
    476 A.2d 861
    , 867-68 (N.J. Super. Ct. App. Div.
    48
    B.      State-Law Claims and the Supremacy Clause
    Inasmuch as we have determined that sovereign
    immunity does not bar this action and that the District Court had
    constitutional and statutory jurisdiction we finally reach the
    substantive aspects of the case. We start this discussion by
    recognizing that although this case is essentially a dispute over
    the application of federal law, the States‟ claims arise from their
    attempt to enforce their unclaimed property acts against the
    Federal Government. The Government asserts that these claims
    run afoul of the Supremacy Clause of the Constitution in art. VI,
    cl. 2, which provides that the Constitution and laws in pursuance
    of it “shall be the supreme Law of the Land.” State laws may
    violate the Supremacy Clause in two ways. Under the doctrine
    of federal preemption, state laws are invalid if they “conflict
    with an affirmative command of Congress.” North Dakota v
    United States, 
    495 U.S. 423
    , 434, 
    110 S. Ct. 1986
    , 1994 (1990)
    (citing Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 
    6 L. Ed. 23
    (1824)). And under the doctrine of intergovernmental
    immunity, states may not “regulate the Government directly or
    1984). In view of First Jersey Securities we see no reason to
    believe that even without regard for federal court intervention
    through the exercise of removal jurisdiction or Supreme Court
    appellate review, the New Jersey courts would have entertained
    this action if the State of New Jersey had initiated the case in the
    New Jersey Superior Court and named the Federal Defendants
    as defendants. Of course, a result that the States did not have
    any forum in which to bring their claims surely would have been
    inconsistent with the intent of Congress in adopting the 1976
    APA amendments.
    49
    discriminate against it.” North Dakota, 495 U.S. at 434, 110
    S.Ct. at 1994 (citing McCulloch v. Maryland, 17 U.S. (4
    Wheat.) 316, 425-37, 
    4 L. Ed. 579
     (1819)).
    1.     Federal Preemption
    Federal preemption doctrine “provid[es] Congress with
    the power to preempt state legislation if it so intends.” Roth v.
    Norfalco LLC, 
    651 F.3d 367
    , 374 (3d Cir. 2011) (internal
    quotation marks and citation omitted). There are three types of
    preemption: express preemption and two types of implied
    preemption, field preemption and conflict preemption. Farina v.
    Nokia Inc., 
    625 F.3d 97
    , 115 (3d Cir. 2010) (citing Hillsborough
    Cnty. v. Automated Med. Labs., Inc., 
    471 U.S. 707
    , 713, 
    105 S. Ct. 2371
    , 2375 (1985)). There is express preemption when a
    federal enactment contains language that is explicit about its
    preemptive effect. See St. Thomas-St. John Hotel & Tourism
    Ass‟n v. Gov‟t of the V.I., 
    218 F.3d 232
    , 238 (3d Cir. 2000).
    There is field preemption when Congress has regulated an area
    so pervasively that it has not left room for state regulation. See
    United States v. Locke, 
    529 U.S. 89
    , 111, 
    120 S. Ct. 1135
    , 1149
    (2000). There is conflict preemption when compliance with
    both state and federal law is impossible, “or where state law
    erects an „obstacle to the accomplishment and execution of the
    full purposes and objectives of Congress.‟” Farina, 625 F.3d at
    115 (internal quotation marks omitted). Moreover, “[w]here
    Congress has delegated the authority to regulate a particular
    field to an administrative agency, the agency‟s regulations
    issued pursuant to that authority have no less preemptive effect
    than federal statutes.” Fellner v. Tri-Union Seafoods, LLC, 
    539 F.3d 237
    , 243 (3d Cir. 2008). Although courts define the
    50
    categories of preemption separately the categories are not
    “rigidly distinct. Indeed, field pre-emption may be understood
    as a species of conflict pre-emption: A state law that falls within
    a pre-empted field conflicts with Congress‟ intent . . . to
    exclude state regulation.” English v. Gen. Elec. Co., 
    496 U.S. 72
    , 79 n.5, 
    110 S. Ct. 2270
    , 2275 n.5 (1990).
    There are two guiding principles of preemption
    jurisprudence. “„First, the purpose of Congress is the ultimate
    touchstone in every pre-emption case.‟” Wyeth v. Levine, 
    555 U.S. 555
    , 565, 
    129 S. Ct. 1187
    , 1194 (2009) (quoting Medtronic,
    Inc. v. Lohr, 
    518 U.S. 470
    , 485, 
    116 S. Ct. 2240
    , 2259 (1996)).
    Second, we are guided by a “presumption against preemption,”
    Roth, 651 F.3d at 375 (citing Deweese v. Nat‟l R.R. Passenger
    Corp., 
    590 F.3d 239
    , 246 (3d Cir. 2009)), because we assume
    “that the historic police powers of the States [are] not to be
    superseded by the Federal Act unless that was the clear and
    manifest purpose of Congress.” Levine, 555 U.S. at 565, 129
    S.Ct. at 1194-95 (quoting Lohr, 518 U.S. at 485, 116 S.Ct. at
    2250) (internal quotation marks omitted). However, the
    presumption against preemption does not apply where Congress
    has adopted the statute claimed to have preemptive effect to
    apply in a field that “the States have [not] traditionally
    occupied.” Buckman Co. v. Plaintiffs‟ Legal Comm., 
    531 U.S. 341
    , 347-48, 
    121 S. Ct. 1012
    , 1017 (2001) (quoting Rice v. Santa
    Fe Elevator Corp., 
    331 U.S. 218
    , 230, 
    67 S. Ct. 1146
    , 1152
    (1947)).
    We agree with the District Court that the federal statutes
    and regulations pertaining to United States savings bonds
    preempt the States‟ unclaimed property acts insofar as the States
    51
    seek to apply their acts to take custody of the proceeds of the
    matured but unredeemed savings bonds. In reaching this
    conclusion we recognize that there is no federal statute or
    regulation that expressly preempts the application of the States‟
    unclaimed property acts in the way that the States seek to
    enforce them in this litigation. But it is equally important to
    recognize that “[f]ederal law of course governs the interpretation
    of the nature of the rights and obligations created by the
    Government bonds themselves.” Free, 369 U.S. at 669-70, 82
    S.Ct. at 1094 (quoting Bank of Am. Trust & Savs. Ass‟n v.
    Parnell, 
    352 U.S. 29
    , 34, 
    77 S. Ct. 119
    , 122 (1956)). Thus, in
    Free a surviving husband filed an action against a beneficiary of
    his wife‟s will to determine the parties‟ rights in United States
    savings bonds that the husband and wife purchased together.
    The Supreme Court held that Texas law providing that the
    savings bonds were community property was inconsistent with
    federal regulations that provide that when either co-owner dies,
    “the survivor will be recognized as the sole and absolute owner
    [of the bonds] and thus the federal regulation preempted the
    Texas law.” Id. at 664-65, 82 S.Ct. at 1091 (quoting 31 C.F.R. §
    315.61). While in the case before us the conflict between state
    and federal law is less stark, we similarly hold that the relevant
    federal statutes and regulations preempt the States‟ unclaimed
    property acts.
    The States‟ unclaimed property acts conflict with federal
    law regarding United States savings bonds in multiple ways.
    First, in advancing the goal of making the bonds “attractive to
    savers and investors,” see Free, 369 U.S. at 669, 82 S.Ct. at
    1093, Congress has authorized the Secretary to implement
    regulations specifying that “owners of savings bonds may keep
    52
    the bonds after maturity.” 31 U.S.C. § 3105(b)(2)(A).25 The
    plaintiff States‟ unclaimed property acts, by contrast, specify
    that matured bonds are abandoned and their proceeds are subject
    to the acts if not redeemed within a time period as short as one
    year after maturity. See, e.g., N.J. Stat. Ann. § 46:30B-41.2.
    Such provisions starkly conflict with savings bonds regulations
    imposing “conditions governing their redemption.” 31 U.S.C. §
    3105(c)(4); see 31 C.F.R. § 315.5(a) (providing that the
    registered owner of the bond is presumed conclusively to be the
    owner); § 315.15 (providing that savings bonds are “payable
    only to the owners named on the bonds, except as specifically
    provided in these regulations and then only in the manner and to
    the extent so provided.”); § 315.20(b) (providing that the
    Department of the Treasury will recognize a claim of ownership
    or interest in a bond only if “established by valid, judicial
    proceedings”); § 315.35(a) (providing that payment may be
    made only to persons entitled to it under the regulations); §
    315.39 (providing that the owner of the bond may present it to
    an authorized paying agent for redemption).
    The States assert that the “restrictions on „payment‟ in
    these regulations foreclose only redemption of bonds by persons
    who are not owners, not application of historic laws governing
    disposition of property not redeemed by its owner.” Appellants‟
    br. at 29. In other words, the States argue that because they
    25
    The Secretary effectively has allowed owners of savings
    bonds to keep them after maturity and to earn interest after
    maturity because the Treasury has extended the bonds‟ original
    maturity dates and interest accrues during the extension period.
    See supra note 3.
    53
    seek only custody of the bond proceeds, their unclaimed
    property acts will not interfere directly with federal contracts or
    the regulations regarding redemption.              However, those
    regulations conflict with the outcome that the States seek here.
    Most critically, application of the States‟ unclaimed property
    acts would interfere with the terms of the contracts between the
    United States and the owners of the bonds because, according to
    the States‟ complaint, they effectively would substitute the
    respective States for the United States as the obligor on affected
    savings bonds. See app. at 99 (asserting that “delivery of an
    Unclaimed Bond to a State . . . will discharge the Treasury from
    its obligation under the bond,” such that the bond owners may
    “claim their property from the state”). As the Government
    points out, the bonds are pledged “on the credit of the United
    States,” U.S. Const. art. I, § 8, cl. 2, and not on the credit of any
    individual state. Both bondholders and the United States, who
    bargained for a federal redemption process that the Federal
    Government set forth in detail in the relevant statutes and
    regulations, instead would have to comply with procedures set
    forth in the various States‟ unclaimed property acts, thus
    “intrud[ing] upon the rights and the duties of the United States.”
    See Free, 369 U.S. at 669, 82 S.Ct. at 1094. The federal
    regulations regarding redemption effectively would be nullified.
    This change in redemption procedures if the States obtain
    custody of the proceeds of the matured but unredeemed bonds
    might not be a small thing from the point of view of an owner of
    a bond seeking to redeem it. As we explained above,
    redemption of a matured savings bond is now an uncomplicated
    process involving little more than a trip to a bank, a venue likely
    to be familiar to the owner of the bond, with the bondholder
    54
    dealing with a bank employee with whom he already may be
    acquainted. On the other hand, though it is possible that the
    States would designate the same payment agents as the
    Government now designates if the States obtained custody of the
    proceeds of the bonds, an owner seeking those funds would
    have to navigate whatever procedures the States adopted for the
    owner to receive the funds and those procedures could be more
    complex than those presently in place under federal law.
    Moreover, a bondholder‟s effort to recover the funds in a State‟s
    custody might require the bondowner to deal with what almost
    certainly would be an unfamiliar state bureaucracy. We simply
    do not know.
    The Government also has expressed concerns that a
    substitution of the plaintiff States as obligors on the bonds could
    result in the United States being subject to multiple obligations
    on a single savings bond. Thus, the Government fears that
    bondholders still would have a contractual right to payment
    from the United States based on the terms of the bonds even
    though the various state unclaimed property acts would give
    bondholders the right to recover the proceeds of property
    deemed “abandoned” or “unclaimed” from the States. Although
    the States have indicated that they would indemnify the Federal
    Government if it was required to make payments on matured
    bonds to bondholders after the Government delivered the
    proceeds of the bonds to the States pursuant to their unclaimed
    property acts, the possible availability of indemnification does
    not change the fact that application of the States‟ acts in the
    redemption process significantly would alter that process as
    55
    contemplated in the relevant federal regulations.26
    The States note that the federal statutes and regulations
    implementing the savings bond program do not include
    provisions for the disposition of abandoned property, and thus
    they argue that federal law leaves room for the operation of their
    unclaimed property acts in this field. However, the bond
    proceeds are not “abandoned” or “unclaimed” under federal law
    because the owners of the bonds may redeem them at any time
    after they mature, and thus Congress has not been silent with
    respect to the fate of the proceeds of unclaimed bonds. The
    States‟ efforts to impose the status of “abandoned” or
    “unclaimed” on the Federal Government‟s obligations only
    underscores the conflict between federal and state law, in which
    federal law must prevail. There simply is no escape from the
    fact that the Federal Government does not regard matured but
    unredeemed bonds as abandoned even in situations in which a
    state would do exactly that. Of course, in a preemption analysis
    26
    We are not predicating our result on a conclusion that
    honoring a custody-based unclaimed property act might subject
    the United States to multiple liabilities on a single bond. We
    decline to speculate on what would happen if a bondholder
    sought to redeem a bond by presenting it to a Government
    payment agent and requesting that he be paid the proceeds if the
    Government already had delivered the proceeds of the bond to a
    State pursuant to its unclaimed property act. That situation is
    not before us and, in any event, even disregarding the possibility
    that the Government might face multiple liabilities on a single
    bond by complying with a State‟s unclaimed property act, the
    States‟ unclaimed property acts are preempted.
    56
    the distinction between the custody of the proceeds of the bonds
    or physical custody of the bonds themselves is without legal
    significance. The States seek the transfer of $1.6 billion of
    federally-held funds to their treasuries together with a
    substantial realignment of the obligations that the bonds
    evidence and the procedures for redemption that federal laws
    and regulations have established. It is clear to us that the federal
    statutes and regulations are sufficiently pervasive so as not to
    leave room for the enforcement of the unclaimed property acts
    to achieve the result that the States seek.
    2.     Intergovernmental Immunity
    The Supreme Court‟s decision in McCulloch, 17 U.S. (4
    Wheat.) at 322, established the bedrock principle that “the States
    have no power, by taxation or otherwise, to retard, impede,
    burden, or in any manner control, the operations of the
    constitutional laws enacted by Congress to carry into execution
    the powers vested in the national government.” Thus, that
    famous decision is the source of the doctrine of
    intergovernmental immunity. We agree with the District Court
    that the States‟ desired application of their unclaimed property
    acts would violate the constitutional principles of
    intergovernmental immunity that “states may not directly
    regulate the federal government‟s operations or property.” See
    Arizona v. Bowsher, 
    935 F.2d 332
    , 334 (D.C. Cir. 1991) (citing
    Hancock v. Train, 
    426 U.S. 167
    , 178-80, 
    96 S. Ct. 2006
    , 2012-13
    (1976)).
    First, in this regard, the unclaimed property acts would
    interfere with Congress‟s “[p]ower to dispose of and make all
    57
    needful Rules Acts and Regulations respecting the . . . Property
    belonging to the United States.” See U.S. Const. art. IV, § 3, cl.
    2. On this point, the States argue that the United States no
    longer has a beneficial interest in the undisbursed proceeds from
    the matured but unredeemed bonds. But we disagree. In
    support of their position, the States cite United States v. Klein,
    
    303 U.S. 276
    , 
    58 S. Ct. 536
     (1938), in which the Escheator of the
    Commonwealth of Pennsylvania sought to recover funds that a
    private company owed its bondholders pursuant to a judgment
    entered by a federal district court. Unclaimed funds were paid
    into a court registry and later transferred to the United States
    Treasury under 28 U.S.C. § 852, which at that time provided
    that when money deposited into the registry of a federal court
    was unclaimed for five years, it would be deposited with the
    Treasury, and further provided that “[a]ny person or persons . . .
    entitled to any such money may . . . obtain an order of court
    directing payment of such money to the claimant.” The
    Supreme Court in holding that the State of Pennsylvania could
    acquire title to unclaimed funds through valid escheat
    proceedings observed that the United States held the funds for a
    limited administrative purpose, and did not assert “any right,
    title or interest” in the funds. 303 U.S. at 280, 58 S.Ct. at 538.
    Further, 28 U.S.C. § 852 “contemplate[ed] that changes in
    ownership of the fund may occur, since it provides that after the
    right to the fund has been finally adjudicated and it has been
    covered into the Treasury it shall be paid over to any person
    entitled, upon full proof of his right to receive it.” Id. at 282, 58
    S.Ct. at 539.
    The plaintiff States also rely on In re Moneys Deposited,
    
    243 F.2d 443
     (3d Cir. 1957), where we addressed the status of
    58
    private funds that were not claimed in bankruptcy proceedings
    and thus were transferred to the United States Treasury for
    administrative purposes under 28 U.S.C. § 2042, the successor
    legislation to the statute in issue in Klein. Following Klein, this
    Court held that Pennsylvania could obtain title to the funds
    through escheat proceedings because, as in Klein, the United
    States did not have a beneficial interest in the money deposited
    in the federal registry. In this case, in contrast to how it
    obtained the funds in issue in both Klein and Moneys Deposited,
    the United States did not acquire the funds due on matured but
    unredeemed bonds through the exercise of an administrative
    function. Quite to the contrary, the Government acquired the
    funds from its sale of savings bonds for its own use. Thus,
    unlike the claimants in Klein and Moneys Deposited, the States
    here do not seek funds due on privately undertaken obligations,
    as in Klein, or seek funds in which the Government as custodian
    never had a property interest as was true in both Klein and
    Money Deposited. Rather, the States seek to acquire funds that
    have their origin in debt that the United States incurred to
    finance the operations of the Government.
    As did the District Court, we find Bowsher to be
    persuasive on this point. In Bowsher, 23 states sued the
    Comptroller General of the United States and the Secretary
    claiming the right to custody pursuant to their respective
    unclaimed property acts of money held by the Treasury pursuant
    to 31 U.S.C. § 1322, which granted the Treasury custody of
    money that federal agencies owed to persons whose
    whereabouts were unknown. 935 F.2d at 334. Like the plaintiff
    States in this case, the plaintiffs in Bowsher argued that they
    wanted to return the unclaimed property to its true owners, but
    59
    the court observed that “[w]hen the United States sets aside
    money for the payment of specific debts, it does not thereby lose
    its property interest in that money.” Id. The court further stated:
    The money here is federal money. That various
    persons have claims against the United States in
    amounts exactly matching the funds, and intended
    by Congress to be paid from these funds, does not
    give those individuals a property interest in the
    money. Thus, the states‟ plan would amount to
    direct regulation of federal property. In extracting
    funds from the Treasury, the states would
    effectively subordinate federal property to their
    own laws and appropriate that property, at least
    for a period, for themselves.
    Id. Accordingly, the court held that the states‟ plan to take
    custody of the money violated the doctrine of intergovernmental
    immunity.
    We recognize that the States argue that their unclaimed
    property acts come, in the words of Bowsher, “with a patina of
    ancient history,” see id. at 335, and that there is a presumption
    against preemption of laws of such origin. Nevertheless, we see
    no reason to reach a different result here from that reached in
    Bowsher. Although the United States must pay holders of
    matured bonds the sums due on the bonds when the owners
    present them for payment, until it does so the funds remain
    federal property, and the Government may use the proceeds
    from the sale of savings bonds “for expenditures authorized by
    [federal] law,” 31 U.S.C. § 3105(a).
    60
    The States argue that instead of following Bowsher we
    should be guided by the Supreme Court‟s analysis in
    Connecticut Mutual Life, 333 U.S. at 547, 68 S.Ct. at 686,
    where the Court held that the State of New York could apply its
    unclaimed property act to life insurance policies that out-of-state
    insurers had issued. In rejecting the insurance company‟s
    argument in Moore that the state law violated the Contract
    Clause, the Court noted that “[t]he state is acting as a
    conservator, not as a party to a contract.” Id. Moreover, the
    Court recognized that New York‟s conservatorship of insurance
    money was possible because “[f]oreign corporations must obtain
    state authority to do business, segregate securities, [and] submit
    to examination and state process.” Id. at 550-51, 68 S.Ct. at
    668. But states‟ extensive regulatory powers over corporations
    operating within their borders, in light of McCulloch, do not and
    could not have a counterpart in their relationships with the
    Federal Government, and consequently Connecticut Mutual Life
    is inapposite here.
    For similar reasons, we hold that an order compelling the
    accounting that the plaintiff States request would violate the
    governmental immunity of the United States. As the District
    Court observed, the States‟ unclaimed property acts impose
    “onerous record-keeping and reporting requirements, [and] civil
    and criminal penalties for failure to comply.” App. at 29; see,
    e.g., 72 Pa. Cons. Stat. § 1301.11 (describing reporting
    requirements); § 1301.25 (failure to comply with reporting
    requirements a criminal offense subject to fine and
    imprisonment); N.J. Stat. Ann. § 46:30B-93 (subjecting holders
    of unclaimed property to examination of records by the state
    administrator); Mont. Code Ann. § 70-9-824 (providing for
    61
    financial penalties against holders of unclaimed property who
    fail to report and deliver property to the state administrator).
    Although the States argue that they only seek relief requiring the
    Federal Government to comply with generally applicable laws,
    several of the States have enacted provisions in their unclaimed
    property acts specifically addressed to property within the
    possession of the Federal Government. See N.J. Stat. Ann. §
    46:30B-41.2 (providing that property where the obligor is a
    branch of the United States government is presumed abandoned
    after one year); Ky. Rev. Stat. Ann. § 393.068 (“[a]ll . . .
    personal property . . . held by the federal government . . . shall
    be presumed abandoned if remained unclaimed for five years);
    Mo. Rev. Stat. § 447.532 (property held by an agency of the
    United States deemed abandoned if unclaimed for three years);
    72 Pa. Cons. Stat. § 1301.9 (property held for its owner by any
    “instrumentality of the United States” unclaimed for five years
    deemed abandoned).
    When Congress was considering legislation in the late
    1980s that would have required the Federal Government to
    transfer unclaimed money obtained from various sources —
    including savings bonds — to the states, the General Accounting
    Office estimated that tracking owners of such property would
    cost over $23 million.27 See app. at 185. Although the States
    assert that they will not seek to enforce civil and criminal
    penalties in the event the Federal Government fails to comply
    with their respective acts, even if future State officials adhere to
    this policy, the fact remains that forcing the Federal Government
    27
    We are not drawing any inference with respect to the issues in
    this case from the fact that Congress did not adopt that bill.
    62
    to account to the plaintiff States for unredeemed savings bonds
    or their proceeds — regardless of how stringently the States
    decide to enforce the reporting requirements contained in their
    respective acts — would result in a direct regulation of the
    Federal Government in contravention of the Supremacy Clause.
    This result is not permissible.
    C.      The Tenth Amendment
    The Tenth Amendment provides that “[t]he powers not
    delegated to the United States by the Constitution, nor
    prohibited by it to the States, are reserved to the States
    respectively, or to the people.” The States argue that the status
    quo amounts to a federal escheat of the proceeds from the
    unclaimed bonds, a process which they contend violates the
    Tenth Amendment because the Federal Government does not
    possess the escheat power, as it is a traditional prerogative of the
    states. However, the funds at issue here have not been
    escheated to the Government and the Government does not seek
    to acquire them through escheat proceedings. To the contrary
    the Government is holding the funds and will disburse them to
    the bondholders or their successors if they present the bonds for
    redemption. Moreover, our result does not nullify state escheat
    laws for, as provided in the federal regulations and as
    recognized by the Treasury, third parties, including the States,
    may obtain ownership of the bonds — and consequently the
    right to redemption — through “valid[] judicial proceedings,” 31
    C.F.R. § 315.20(b), so long as they submit certified copies of the
    judgment or order affecting ownership and other evidence that
    may be necessary to support the validity of the judgment or
    order. See 31 C.F.R. § 315.23. The Government through its
    63
    issuance of the Escheat Decision admits as much. Here,
    however, the States merely seek custody of, not title to, the
    funds at issue under their unclaimed property acts.28
    In considering the States‟ Tenth Amendment contentions
    it is important to remember that the Government administers the
    savings bond program pursuant to the federal constitutional
    power “[t]o borrow money on the credit of the United States.”
    Free, 369 U.S. at 666-67, 82 S.Ct. at 1092. Pursuant to this
    power, 31 U.S.C. § 3105(b)(2)(A) authorizes the Secretary of
    the Treasury to “prescribe regulations providing that . . . owners
    of savings bonds may keep the bonds after maturity or after a
    period beyond maturity.” “If Congress acts under one of its
    28
    We hasten to add that while in concluding that the State
    custody-based unclaimed property acts are preempted we are
    distinguishing, as does the Government itself, those acts from
    title-based acts, we do not imply that our result would be
    different if, confronted with a judgment of escheat under a title-
    based escheat act, the Government abandoned its long held
    position as reflected in the Escheat Decision and refused to
    recognize the enforceability of the judgment with respect to
    savings bonds or their proceeds. We simply are not faced with
    that possibility and thus we do not address it. We merely are
    ruling on the basis of the legal picture as the Government
    presently sees it. Furthermore, we neither are agreeing nor
    disagreeing with the States with respect to their contention that
    the Federal Government does not have escheat power. We see
    no need to pass on this contention as the Federal Government is
    not seeking to escheat the proceeds of matured but unredeemed
    bonds.
    64
    enumerated powers . . . there can be no violation of the Tenth
    Amendment.” United States v. Parker, 
    108 F.3d 28
    , 31 (3d Cir.
    1997) (quoting United States v. Mussari, 
    95 F.3d 787
    , 791 (9th
    Cir. 1996)). Accordingly, the States‟ Tenth Amendment claim
    must fail.
    V.      CONCLUSION
    Though the United States pursuant to 5 U.S.C. § 702 has
    waived its sovereign immunity from suit in this case, we do not
    find any merit in any of the States‟ claims. Therefore, we will
    affirm the District Court‟s February 5, 2010 order dismissing the
    action under Rule 12(b)(6).
    65
    

Document Info

Docket Number: 10-1963

Filed Date: 6/27/2012

Precedential Status: Precedential

Modified Date: 10/30/2014

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