Court Opinion

ID: 4425039
Source: CourtListenerOpinion
Date Created: 2019-08-13 15:00:52.122409+00
Date Added: 2024-06-11T14:27:40.658336
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                 ______________________

 JAKE LATURNER, TREASURER OF THE STATE
  OF KANSAS, ANDREA LEA, IN HER OFFICIAL
   CAPACITY AS AUDITOR OF THE STATE OF
                 ARKANSAS,
              Plaintiffs-Appellees

                            v.

                   UNITED STATES,
                  Defendant-Appellant
                 ______________________

                  2018-1509, 2018-1510
                 ______________________

    Appeals from the United States Court of Federal
Claims in Nos. 1:13-cv-01011-EDK, 1:16-cv-00043-EDK,
Judge Elaine Kaplan.
                ______________________

                Decided: August 13, 2019
                 ______________________

    DAVID CHARLES FREDERICK, Kellogg, Huber, Hansen,
Todd, Evans & Figel, PLLC, Washington, DC, argued for
all plaintiffs-appellees. Plaintiff-appellee Jake LaTurner
also represented by SCOTT H. ANGSTREICH, KATHERINE
COOPER, BENJAMIN SOFTNESS;              JONATHAN BRETT
MILBOURN, Horn Aylward & Bandy, LLC, Kansas City,
MO.

   DAVID THOMPSON, Cooper & Kirk, PLLC, Washington,
2                                LATURNER v. UNITED STATES

DC, for plaintiff-appellee Andrea Lea. Also represented by
JOHN DAVID OHLENDORF, PETER A. PATTERSON; JOSEPH H.
MELTZER, MELISSA L. TROUTNER, Kessler Topaz Meltzer &
Check, LLP, Radnor, PA.

    ALISA BETH KLEIN, Appellate Staff, Civil Division,
United States Department of Justice, Washington, DC, ar-
gued for defendant-appellant. Also represented by MARK
B. STERN, JOSEPH H. HUNT.

    GEORGE W. NEVILLE, Office of the Mississippi Attorney
General, Jackson, MS, for amici curiae State of Florida,
State of Mississippi, State of Georgia, State of Indiana,
State of Iowa, Commonwealth of Kentucky, State of Loui-
siana, Commonwealth of Pennsylvania, State of Ohio,
State of South Carolina, State of Rhode Island, State of
South Dakota.
                 ______________________

     Before DYK, CHEN, and HUGHES, Circuit Judges.
DYK, Circuit Judge:
     During the Great Depression, President Franklin D.
Roosevelt signed legislation allowing the U.S. Department
of Treasury (“Treasury”) to issue savings bonds, a type of
debt security designed to be affordable and attractive to
even the inexperienced investor. Under longstanding fed-
eral law, savings bonds never expire and may be redeemed
at any time after maturity.           See, e.g., 31 U.S.C.
§ 3105(b)(2)(A); 31 C.F.R. § 315.35(c). Federal law also lim-
its the ability to transfer bonds. 31 C.F.R. § 315.15. Kan-
sas and Arkansas (the “States”) passed so-called “escheat”
laws providing that if bond owners do not redeem their sav-
ings bonds within five years after maturity, the bonds will
be considered abandoned and title will transfer (i.e., “es-
cheat”) to the state two or three years thereafter. Kan.
Stat. Ann. §§ 58-3935(a)(16), 58-3979(a) (2000); Ark. Code
Ann. § 18-28-231(a)–(b) (2015).
LATURNER v. UNITED STATES                                  3

    Pursuant to these escheat laws, the States sought to
redeem a large but unknown number of bonds, estimated
to be worth hundreds of millions of dollars. When Treasury
refused, the States filed suit in the Court of Federal Claims
(“Claims Court”). The Claims Court agreed with the
States, holding that Treasury must pay the proceeds of the
relevant bonds—once it has identified those bonds—to the
States. The cases were certified for interlocutory appeal to
this court.
    We reverse for two independent reasons. First, we hold
that federal law preempts the States’ escheat laws. That
means that the bonds belong to the original bond owners,
not the States, and thus the States cannot redeem the
bonds. Second, even if the States owned the bonds, they
could not obtain any greater rights than the original bond
owners, and, under Federal law, 31 C.F.R. § 315.29(c), a
bond owner must provide the serial number to redeem
bonds six years or more past maturity, which includes all
bonds at issue here. Because the States do not have the
physical bonds or the bond serial numbers, Treasury
properly denied their request for redemption.
                       BACKGROUND
    This case concerns the ability of states to acquire U.S.
savings bonds through escheat, the centuries-old right of
the states to “take custody of or assume title to abandoned
personal property.” Delaware v. New York, 507 U.S. 490,
497 (1993). A savings bond is a contract between the
United States and the bond owner, and Treasury regula-
tions are incorporated into the bond contract. See Treas-
urer of New Jersey v. U.S. Dep’t of the Treasury, 684 F.3d
382, 387 (3d Cir. 2012), cert. denied, 569 U.S. 1004 (2013).
    Treasury “regulations do not impose any time limits for
bond owners to redeem the[se] savings bonds.” Id. at 388;
see also 31 U.S.C. § 3105(b)(2)(A) (authorizing Treasury to
adopt regulations providing that “owners of savings bonds
may keep the bonds after maturity”). In addition, Treasury
4                                  LATURNER v. UNITED STATES

regulations provide that savings bonds are generally “not
transferable and are payable only to the owners named on
the bonds.” 31 C.F.R. § 315.15. When the sole owner of a
bond dies, “the bond becomes the property of that dece-
dent’s estate.” 31 C.F.R. § 315.70(a). Federal law imposes
no time limit on the redemption of savings bonds, and nu-
merous savings bonds in the country have matured but
have not yet been redeemed by their owners. Generally, in
order to redeem bonds not in the physical possession of the
owner—for example, bonds that have been lost or de-
stroyed—the owner must supply the serial numbers of the
bonds to Treasury.       31 C.F.R. §§ 315.25, 315.26(a),
315.29(c). The States do not have the serial numbers of the
bonds in question.
    This case is related to an earlier litigation that resulted
in a decision by the Third Circuit. In the 2000s, several
states attempted to acquire the proceeds of unredeemed
savings bonds through so-called “custody escheat” laws.
See New Jersey, 684 F.3d at 389–90. These laws provided
that if bond owners with last known addresses in the state
did not redeem their bonds within a certain time after ma-
turity (such as five years), the bonds would be deemed
abandoned property. The state could then obtain legal cus-
tody of (but not title to) the bonds. When several states
asked Treasury to redeem bonds obtained through these
custody escheat laws, Treasury refused. Treasury ex-
plained that for the bonds to be paid, a state “must have
possession of the bonds” and “obtain title to the individual
bonds”—neither of which the states had. J.A. 507 (2004
letter to North Carolina); accord J.A. 509 (letter to Illinois);
J.A. 511 (letter to D.C.); J.A. 513 (letter to Kentucky); J.A.
515 (letter to New Hampshire); J.A. 517 (letter to South
Dakota); J.A. 519 (letter to Connecticut); J.A. 521 (letter to
Florida).
    A number of states filed suit in the District of New Jer-
sey, seeking an order directing the government to pay the
bond proceeds. The district court upheld Treasury’s denial
LATURNER v. UNITED STATES                                  5

of payment, holding that the states’ custody escheat laws
were preempted. See New Jersey, 684 F.3d at 394. The
Third Circuit affirmed, explaining that the states’ laws
“conflict[ed] with federal law regarding United States sav-
ings bonds in multiple ways.” Id. at 407. The court rea-
soned that unredeemed bonds are “not ‘abandoned’ or
‘unclaimed’ under federal law because the owners of the
bonds may redeem them at any time after they mature.”
Id. at 409. “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 [certain] time period” after maturity. Id. at 407–08.
“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 [state law]
would do exactly that.” Id. at 409. However, the Third Cir-
cuit declined to address whether the outcome would be dif-
ferent if states obtained title to savings bonds, as opposed
to mere custody. Id. at 413 n.28 (“We simply are not faced
with that possibility and thus we do not address it.”).
    After the New Jersey litigation, Kansas and Arkansas
acted to obtain title to the bonds using “title escheat”
laws—precisely the circumstance the Third Circuit’s New
Jersey decision did not reach. Kansas’s title escheat law
provides that a savings bond will be considered “aban-
doned” if it is not redeemed within five years of maturity.
Kan. Stat. Ann. § 58-3935(a)(16). If the bond remains un-
redeemed for three more years—that is, for a total of eight
years after maturity—Kansas may obtain a state court
judgment that title to the bond has escheated to the state.
Id. § 58-3979(a). Arkansas’s law is similar, providing that
savings bonds will be considered abandoned five years af-
ter maturity and that the state can obtain title to the bonds
two years after that. Ark. Code Ann. § 18-28-231(a)–(b).
   Kansas and Arkansas obtained state court judgments
purporting to give them title to the category of bonds
deemed abandoned under these title escheat laws—that is,
6                                 LATURNER v. UNITED STATES

all unredeemed bonds that were sufficiently past maturity
and were registered to owners with last known addresses
in Kansas or Arkansas. 1 See J.A. 251 (Kansas); J.A. 1244
(Arkansas). These bonds were not in the States’ posses-
sion. 2 Kansas and Arkansas estimated that the allegedly
abandoned bonds were worth $151.8 million and $160 mil-
lion, respectively.
    The States then attempted to redeem these bonds, ask-
ing Treasury to redeem bonds whose registered owners had
last known addresses in the state, relying on its general
authority to escheat debts owed to individuals whose last
known addresses were in the state. See generally Texas v.
New Jersey, 379 U.S. 674, 680–81 (1965) (holding that as
to abandoned intangible property—there, various debts—
“the right and power to escheat the debt should be accorded
to the State of the creditor’s last known address”). 3

1    For Kansas, the relevant bonds are 40-year Series E
bonds issued between 1941 and December 31, 1961; 30-
year Series E bonds issued between 1965 and December 31,
1972; and Series A–D, F, G, H, J, and K bonds issued before
December 31, 1972. J.A. 245. For Arkansas, the relevant
bonds are “all unredeemed series A through D, F, G, J, and
K bonds, and all series E and H bonds that were issued on
or before October 16, 1978.” J.A. 1243.
2    The States also escheated and asked Treasury to re-
deem a much smaller number of bonds that they did pos-
sess. Treasury did so, relying on its authority under 31
C.F.R. § 315.90 to waive its other regulations. See Regula-
tions Governing United States Savings Bonds, 80 Fed. Reg.
37,559, 37,3560 (U.S. Dep’t of Treasury July 1, 2015). The
bonds in the States’ possession are not at issue in this case.
3    Below, the government challenged the States’ author-
ity to escheat based on the last known address of the regis-
tered bond owners, since some bond owners may have
moved out of state. The government does not make this
LATURNER v. UNITED STATES                                   7

Treasury declined, stating that “[u]nless some exception or
waiver in [its] regulations applies, Treasury is only author-
ized to redeem a savings bond to the registered owner,” J.A.
368, who retains the right “to redeem their savings bonds
at any time, even after maturity,” J.A. 369.
    The States sued for damages under the Tucker Act, 28
U.S.C. § 1491, alleging that the States were the owners of
the absent bonds and that the government had breached
the terms of the savings-bonds contracts by refusing to re-
deem the bonds. On cross-motions for summary judgment,
the Claims Court sided with the States, holding that Treas-
ury was liable to the States and had an obligation to iden-
tify the absent bonds. The Claims Court reasoned that
there was no preemption because “federal law itself (i.e., 31
C.F.R. § 315.20(b)) requires Treasury to recognize claims of
ownership based on title-based escheatment statutes.” La-
turner v. United States, 133 Fed. Cl. 47, 71 (2017).
    The court also concluded that the States have the
“right[] as an owner of the bonds to make a claim for their
proceeds based on the theory that they are ‘lost.’” Id. at 70.
It determined that “Treasury breached the [bond] contract
when it refused to provide [the States] with information
about the bonds and demanded that [the States] produce
the bond certificates as a condition of redeeming their pro-
ceeds.” Id. at 65. Thus, the Claims Court held that the
States were “entitled to receive from the government the
information necessary to allow it to make a request to re-
deem the bonds,” including the serial numbers of the ab-
sent bonds. Id. at 77; see also id. at 70; Laturner v. United
States, 135 Fed. Cl. 501, 505 (2017).

argument on appeal, and we assume without deciding that
the States have the authority—absent preemption—to es-
cheat savings bonds based on the last-known address of the
registered owner.
8                                 LATURNER v. UNITED STATES

    The Claims Court certified its summary judgment or-
ders for interlocutory appeal under 28 U.S.C. § 1292(d)(2), 4
noting that identifying the absent bonds would be time-in-
tensive and expensive and that there are eight other pend-
ing cases in which other states are asserting similar claims.
The court also stayed the proceedings pending appeal.
    We granted the government’s petitions for leave to ap-
peal and consolidated the appeals. We have jurisdiction
under 28 U.S.C. § 1292(d)(2).
                        DISCUSSION
                              I
    We first address whether, as the government contends,
the Treasury regulations governing U.S. savings bonds
preempt the States’ escheat laws regarding unredeemed
savings bonds. The parties assume that the regulations in
effect before December 24, 2015, are the relevant regula-
tions. 5 We proceed on that assumption.

4   The language of section 1292(d)(2) “is virtually identi-
cal to 28 U.S.C. § 1292(b) . . . which governs interlocutory
review by other courts of appeals.” United States v. Con-
nolly, 716 F.2d 882, 883 n.1 (Fed. Cir. 1983) (en banc).
5   The government’s position is that the relevant regula-
tions are those “that were in effect at the time the requests
were made”—that is, in May 2013 (for Kansas) and in No-
vember 2015 (for Arkansas), respectively. Gov’t Open. Br.
at 7 n.3. (There was no change in the regulations between
these dates.) The Claims Court indicated that it was ap-
plying the regulations in effect when the States filed their
complaints—that is, in December 2013 (for Kansas) and in
November 2015 (for Arkansas), respectively. The States’
position is somewhat unclear, though they agree that the
pre-amendment regulations apply to this case. Given the
parties’ agreement as to the relevant regulations, we
LATURNER v. UNITED STATES                                   9

                              A
    The Constitution limits state sovereignty “by granting
certain legislative powers to Congress while providing in
the Supremacy Clause that federal law is the ‘supreme
Law of the Land . . . any Thing in the Constitution or Laws
of any State to the Contrary notwithstanding.’” Murphy v.
NCAA, 138 S. Ct. 1461, 1476 (2018) (quoting U.S. Const.
art. VI, cl. 2) (internal citation omitted). “This means that
when federal and state law conflict, federal law prevails
and state law is preempted.” Id. The Supreme Court has
“identified three different types of preemption—‘conflict,’
‘express,’ and ‘field,’ but all of them work in the same way:
Congress enacts a law that imposes restrictions or confers
rights on private actors; a state law confers rights or im-
poses restrictions that conflict with the federal law; and
therefore the federal law takes precedence and the state
law is preempted.” Id. at 1480 (internal citation omitted).
For example, in Arizona v. United States, 567 U.S. 387
(2012), the Court held that federal statutes “provide a full
set of standards governing alien registration” and therefore
“foreclose any state regulation in the area.” Id. at 401. In
Murphy, the Court elaborated that “[w]hat this means is
that the federal registration provisions not only impose fed-
eral registration obligations on aliens but also confer a fed-
eral right to be free from any other registration
requirements.” 138 S. Ct. at 1481. Authorized Federal reg-
ulations can preempt just as federal statutes can. See
Hillsborough Cty. v. Automated Med. Labs., Inc., 471 U.S.
707, 713 (1985).
    The Supreme Court’s decision in Free v. Bland, 369
U.S. 663 (1962) illustrates how preemption applies in the
context of the U.S. savings bond program. In that case,
Treasury regulations provided that when one bond owner

assume that the regulations in effect at the time the bonds
were issued were not materially different.
10                                 LATURNER v. UNITED STATES

died, the surviving co-owner (there, the decedent’s hus-
band) became the sole owner of the bond. Id. at 664–65.
Under Texas state community property laws, however, the
principal beneficiary under the decedent’s will (there, the
decedent’s son) was entitled to a one-half interest in the
bonds—despite not being a co-owner of the bond under
Treasury regulations. Id. The Court held that the state
law was preempted because it prevented bond owners
“from taking advantage of the survivorship provisions” of
the Treasury regulations. Id. at 669–70. The Court rea-
soned that “Federal law of course governs the interpreta-
tion of the nature of the rights and obligations created by
the Government bonds,” id. at 669–70 (quoting Bank of
Am. Tr. & Sav. Ass’n v. Parnell, 352 U.S. 29, 34 (1956)),
and a state may not “fail[] to give effect to a term or condi-
tion under which a federal bond is issued,” id. at 669. In
other words, Treasury regulations conferred a right on
bond holders which Texas state law impermissibly re-
stricted.
    Here there is a similar conflict between state and Fed-
eral law. Federal law confers on bond holders the right to
keep their bonds after maturity. Congress specifically au-
thorized Treasury to prescribe regulations providing that
“owners of savings bonds may keep the bonds after ma-
turity,” 31 U.S.C. § 3105(b)(2)(A), as well as regulations
setting forth “the conditions, including restrictions on
transfer, to which they will be subject,” id. § 3105(c)(3), and
the “conditions governing their redemption,” id.
§ 3105(c)(4). Treasury regulations impose no time limit on
the redemption of savings bonds. See, e.g., 31 C.F.R.
§ 315.35(c) (“A series E bond will be paid at any time after
two months from issue date at the appropriate redemption
value . . . .” (emphasis added)); New Jersey, 684 F.3d at 409
(“[U]nder federal law . . . the owners of the bonds may re-
deem them at any time after they mature . . . .”). And
31 C.F.R. § 315.15 provides that “[s]avings bonds are not
transferable and are payable only to the owners named on
LATURNER v. UNITED STATES                                  11

the bonds, except as specifically provided in these regula-
tions and then only in the manner and to the extent so pro-
vided.” See also id. § 315.5(a) (providing that savings
bonds “are issued only in registered form” and “must ex-
press the actual ownership of” the bond, and that “registra-
tion is conclusive of ownership” with limited exceptions).
Federal law thus confers on bond holders “a federal right
to engage in certain conduct”—the right to keep their bonds
after maturity without the bonds expiring—“subject only to
certain (federal) constraints.” See Murphy, 138 S. Ct. at
1480.
    The States’ escheat laws on the other hand impermis-
sibly restrict the bond holder’s right to retain ownership of
the bonds. Under the escheat laws, if bond holders do not
redeem their bonds promptly enough (as decided by the
States), they lose ownership and the bonds will transfer to
the state. Absent Federal law authorizing such a state law
restriction, the result is clear: “the federal law takes prec-
edence and the state law is preempted.” Id.
                              B
     The States do not contest that Federal law would
preempt their escheat laws absent Federal authorization
for the state legislation. But they contend that here there
is no conflict between Federal law and the States’ escheat
laws because Treasury regulations themselves permit the
transfer of ownership under escheat laws. They rely on
31 C.F.R. § 315.20(b), which provides that “Treasury will
recognize a claim [of bond ownership by a third party] . . .
if established by valid, judicial proceedings, but only as
specifically provided in this subpart” (emphasis added)—
i.e., subpart E (§§ 315.20–23). The States contend that
their escheat proceedings constitute “valid, judicial pro-
ceedings” under this regulation. Although the Third Cir-
cuit in the New Jersey litigation did not decide the question
before us, the States quote language from the Third Cir-
cuit’s opinion that “as provided in the federal regulations
12                                 LATURNER v. UNITED STATES

and as recognized by the Treasury, third parties, including
the States, may obtain ownership of the bonds—and conse-
quently the right to redemption—through ‘valid[] judicial
proceedings,’ 31 C.F.R. § 315.20(b).” 684 F.3d at 412–13
(alteration in original).
    The States also argue that Treasury has made re-
peated statements interpreting § 315.20(b) to allow es-
cheat-based claims so long as the state has title (which the
States allegedly have here). The States rely on two sets of
statements: first, statements Treasury made in denying
past escheat claims by various states; and second, portions
of Treasury’s briefing in the New Jersey litigation. Treas-
ury responds that its prior statements are entirely con-
sistent with its present position that it “considers escheat-
based redemption claims as an exercise of its discretionary
waiver authority under provisions such as 31 C.F.R.
§ 315.90, rather than under § 315.20(b),” and that it grants
such a waiver only when a state has both title and posses-
sion. Gov’t Open. Br. at 16 & n.8.
    Paradoxically, the States disclaim any reliance on Auer
deference, but offer no other basis for deferring to Treas-
ury’s supposed interpretation of its regulations. In any
event, there is no basis for Auer deference here. As the Su-
preme Court recently clarified, “a court should not afford
Auer [v. Robbins, 519 U.S. 452 (1997)] deference unless the
regulation is genuinely ambiguous,” Kisor v. Wilkie, 139 S.
Ct. 2400, 2415 (2019), even after applying “all the ‘tradi-
tional tools’ of construction,” id. (quoting Chevron U.S.A.
Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843 n.9
(1984)). Even if the regulation is genuinely ambiguous,
Auer deference is not appropriate unless “an independent
inquiry into . . . the character and context of the agency in-
terpretation” shows that the interpretation (1) constitutes
the agency’s “authoritative” or “official position,” (2) impli-
cates the agency’s “substantive expertise,” and (3) reflects
the agency’s “fair and considered judgment” of the issue.
Id. at 2416–18.
LATURNER v. UNITED STATES                                 13

     Although we are dubious that the statements here
(particularly those made in the New Jersey briefs) reflect
Treasury’s “fair and considered judgment” on the question
of whether 31 C.F.R. § 315.20(b) requires Treasury to rec-
ognize escheat claims, id. at 2417 & n.6, we need not decide
that question. Nor need we decide whether Treasury’s ear-
lier interpretations were overridden by its more recent in-
terpretations of the regulations. That is so because using
“the ‘traditional tools’ of construction,” the Treasury regu-
lations are not “genuinely ambiguous,” and thus Auer def-
erence is inappropriate. Id. at 2415.
    The regulation on which the States rely, § 315.20(b),
states that Treasury will recognize the “judicial proceed-
ings” “only as specifically provided in this subpart” (empha-
sis added). The only judicial proceedings specifically
provided in the subpart are those for bankruptcy
(§ 315.21), divorce (§ 315.22), and proceedings finding a
person to be entitled to the bond “by reason of a gift causa
mortis” (a gift made in contemplation of impending death)
“from the sole owner” (§ 315.22). Escheat proceedings are
not mentioned. Accordingly, the general prohibition on
transfers of ownership contained in § 315.15 applies.
    The States advance a contrary interpretation of the
regulation, arguing that § 315.20(b)’s “only as specifically
provided in this subpart” limitation refers to “the manner
in which judicial proceedings will be recognized, not the
sorts of proceedings that will be recognized.” Kansas Resp.
Br. at 31 (emphasis in original). This is not a tenable read-
ing of the regulation. A different provision, § 315.23, al-
ready specifies how to prove the validity of a proceeding,
such as by providing certified copies of the judgment. The
“only as specifically provided in this subpart” language in
§ 315.20(b) plainly refers to the types of judicial proceed-
ings that will be recognized.
    The States also assert that § 315.20(a), not § 315.20(b),
exclusively defines the transfers of ownership that
14                               LATURNER v. UNITED STATES

Treasury will not recognize. Section 315.20(a) states that
Treasury “will not recognize a judicial determination that
gives effect to an attempted voluntary transfer inter vivos
of a bond” or that “impairs the rights of survivorship con-
ferred by these regulations upon a coowner or beneficiary.”
Contrary to the States’ argument, § 315.20(a) simply lists
additional transfers that Treasury will not recognize. It
hardly suggests that all other transfers are valid.
    In short, we reject the States’ contention that Treasury
regulations permit the transfer of ownership under escheat
laws. To the contrary, the plain language of the regula-
tions confers on bond holders the right to retain their bonds
without losing ownership if they do not redeem the bonds
within a time limit set by the States.
     While we do not rely on it, we note that Treasury in
December 2015 confirmed this interpretation of its regula-
tion when it amended § 315.20 to specifically provide that
“[e]scheat proceedings will not be recognized under this
subpart.” Treasury also added a new regulation, section
315.88, providing that Treasury “will not recognize an es-
cheat judgment that purports to vest a State with title to a
bond that the State does not possess”—as is the case here—
“or a judgment that purports to grant the State custody of
a bond, but not title”—as was the case in the New Jersey
litigation. 6

6   In Estes v. U.S. Dept’ of the Treasury, the states argued
that the amended regulations were arbitrary and capri-
cious because they represented a change in policy without
an explanation for that change. See 219 F. Supp. 3d 17,
27–28; Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117,
2125 (2016) (“Agencies are free to change their existing pol-
icies so long as they provide a reasoned explanation for the
change.”) The district court rejected this argument, hold-
ing that the amended regulation was not a policy change
LATURNER v. UNITED STATES                                  15

                              II
    There is an additional reason that the States cannot
prevail. The States concede that even if Federal law recog-
nized them as the rightful bond owners, they could have no
greater rights than the original bond owners. See Oral Arg.
at 35:45–36:00. In general, a bond owner must “present
the bond to an authorized paying agent for redemption.”
31 C.F.R. § 315.39(a). The States cannot do so here since
they do not have physical possession of the bonds. 7 How-
ever, the States advance several reasons for why they need
not present the physical bonds for redemption.
                              A
    The States maintain that they need not present the
physical bonds because the bonds should be considered
“lost” and the States can meet the requirements for re-
deeming lost bonds. The Claims Court agreed. Under
31 C.F.R. § 315.25, “[r]elief, by the issue of a substitute
bond or by payment, is authorized for the loss . . . of a bond
after receipt by the owner.” When a bond is lost, “the sav-
ings bond must be identified by serial number and the

but rather “a clarification of prior guidance” and “simply
elaborated on the standards” followed by Treasury before.
Estes, 219 F. Supp. 3d at 27–31. The court also rejected the
states’ Constitutional challenges (based on the Appoint-
ments Clause and Tenth Amendment) to the amended reg-
ulations, id. at 37–41, and the States do not renew those
arguments here.
7   As discussed above, there is no issue here regarding
bonds that the States possess. Treasury allowed the States
to redeem such bonds, invoking its authority under 31
C.F.R. § 315.90 to waive the provisions that only the origi-
nal bond owner may redeem the bond, e.g., 31 C.F.R.
§ 315.15. And when a state possesses the bonds, it is of
course able to present the physical bonds for payment.
16                                 LATURNER v. UNITED STATES

applicant must submit satisfactory evidence of the loss.”
Id. There is an exception to the serial number require-
ment: “If the bond serial number is not known, the claim-
ant must provide sufficient information to enable” the
government “to identify the bond by serial number.” 31
C.F.R. § 315.26(b). But if an owner seeks to redeem the
bond “six years or more after the final maturity of a savings
bond”—which applies to all bonds at issue here—“[n]o
claim . . . will be entertained, unless the claimant supplies
the serial number of the bond.” 31 C.F.R. § 315.29(c). In
other words, the regulations foreclose the option of redeem-
ing a bond by providing other identifying information when
the bonds at issue are six years or more past maturity.
    The government contends that the bonds here are not
“lost” within the meaning of the regulations, because here
there is no evidence that the bonds have been lost by the
original owners. We need not resolve this issue, because
even if the bonds here are considered lost, the States do not
have the bond serial numbers as required by 31 C.F.R.
§ 315.29(c).
                              B
     Kansas argues that it is entitled to relief under the reg-
ulation governing “nonreceipt of a bond,” 31 C.F.R.
§ 315.27, which does not require the bond owner to provide
the serial number. That regulation provides that “[i]f a
bond issued on any transaction is not received, the issuing
agent must be notified as promptly as possible and given
all information available about the nonreceipt.” Id. “If the
application is approved, relief will be granted by the issu-
ance of a bond bearing the same issue date as the bond that
was not received.” Id. This regulation does not apply here.
It is directed at the situation where an individual pur-
chases a bond but does not receive it—in other words,
where Treasury fails to deliver the bond to the original
owner. Indeed, Arkansas (unlike Kansas) recognizes that
this provision governs “those cases where a bond ‘is not
LATURNER v. UNITED STATES                                 17

received’ by the original owner in the first place”—which is
not the situation here. Arkansas Resp. Br. at 50.
                             C
     Arkansas contends that if it can properly claim owner-
ship of the bonds under 31 C.F.R. § 315.20—an argument
rejected earlier in part I—it need not present the physical
bonds or the bond serial numbers. There is no basis for this
contention in the regulations. The provisions in 31 C.F.R.
§§ 315.20–23 lay out requirements for establishing owner-
ship when ownership transferred due to proceedings such
as bankruptcy or divorce. They also establish certain cir-
cumstances in which Treasury will not recognize the trans-
fer of ownership, such as when judicial proceedings are still
pending. See 31 C.F.R. § 315.20(c) (stating that Treasury
“will not accept a notice of an adverse claim or notice of
pending judicial proceedings”). But the general require-
ments for redeeming a bond—such as presenting the phys-
ical bond, or, if the bond is lost, providing the serial
number—still apply, and the States cannot meet them. 8

8    Alternatively, Arkansas argues that since Treasury
has exercised its waiver authority under 31 C.F.R.
§ 315.90(a) to allow states to redeem bonds where the
states had both title and possession, its refusal to extend
such a waiver here “violates its duty of good faith and fair
dealing” implicit in the bond contract. Arkansas Resp. Br.
at 53–54. We disagree. When a state has possession and
title, Treasury has been willing to waive the prohibition on
transfers of ownership and the requirement that only the
registered owner may redeem a bond. See 31 C.F.R.
§ 315.15. But Treasury does not waive the requirement
that the owner must present the physical bond (or, if appli-
cable, the bond serial number). See 31 C.F.R. §§ 315.39(a),
315.25, 315.29(c). Treasury’s refusal to waive those re-
quirements here does not violate the provisions of the bond
18                               LATURNER v. UNITED STATES

                             D
    Finally, both States argue that even if they must pro-
vide the bond serial numbers, the government has the ob-
ligation under the Freedom of Information Act (“FOIA”) to
disclose those serial numbers to the States, or, alterna-
tively, that the government through discovery may be com-
pelled to ascertain the serial numbers.
     The States suggest that the government is obligated to
provide serial numbers in response to a FOIA request, cit-
ing 31 C.F.R. § 323.2(b). But that regulation merely re-
stricts who may obtain information through a FOIA
request, providing that securities records “will ordinarily
be disclosed only to the owners of such securities.” Id. (em-
phasis added). It does not specify what information may
be obtained and under which circumstances. In any event,
whether the States have the right to obtain serial numbers
of bonds through a FOIA request is not before us. Kansas
filed such a FOIA request, which Treasury denied. 9 Kan-
sas did not pursue further review in court, which it would

contract, and the “implied duty of good faith and fair deal-
ing cannot expand a party’s contractual duties beyond
those in the express contract or create duties inconsistent
with the contract’s provisions.” Dobyns v. United States,
915 F.3d 733, 739 (Fed. Cir. 2019) (quoting Precision Pine
& Timber, Inc. v. United States, 596 F.3d 817, 831 (Fed.
Cir. 2010)).
9   Treasury’s denial of Kansas’s FOIA request rested on
two grounds. First, Treasury stated that it lacked respon-
sive records because its records are not compiled or search-
able by the state listed in the bond’s registration. Second,
it determined that disclosing bond records to someone
other than the registered owner would, under the circum-
stances, constitute an unwarranted invasion of personal
privacy pursuant to FOIA Exemption 6. See 5 U.S.C.
§ 552(b)(6).
LATURNER v. UNITED STATES                                  19

have had to seek in district court.        See 5 U.S.C.
§ 552(a)(4)(B). The Claims Court therefore properly de-
clined to rely on FOIA, noting that it has no jurisdiction
over denials of FOIA requests. See Laturner, 135 Fed. Cl.
at 505 n.3.
     Alternatively, the States argue that they should be en-
titled to obtain the bond serial numbers through the ordi-
nary discovery process. While the Claims Court opinion is
not entirely clear, it appears to have agreed. However, the
court recognized in certifying its orders for interlocutory
appeal that “the burdens of discovery going forward (both
in terms of effort and expense) will undoubtedly be formi-
dable given the state of Treasury’s savings bond records.”
J.A. 5. Treasury’s bond records are not digitized and there-
fore not computer-searchable. Nor are they organized by
the state listed in the bond’s registration. For that reason,
locating the serial numbers of the bonds would require
manually searching approximately 3.8 billion savings
bonds records to identify those whose registered owners
had an address in Kansas or Arkansas. Treasury esti-
mates that locating these bonds here would cost $100 mil-
lion and take over 2,000 hours of employee time. J.A. 817.
     We need not decide whether locating the bond serial
numbers would be unduly burdensome such that it would
be an abuse of discretion to grant the States’ discovery re-
quest. That is so because requiring the government to dis-
close the bond serial numbers as a matter of discovery
would impermissibly circumvent the requirement in
31 C.F.R. § 315.29(c) that the bond owner provide the se-
rial number to redeem a bond six or more years past ma-
turity. Adopting the States’ position would effectively
eliminate this requirement, as a bond holder could always
file suit and then obtain the serial number through discov-
ery. This would contravene the principle that the Federal
Rules of Civil Procedure cannot “enlarge or modify any sub-
stantive right.” 28 U.S.C. § 2072(b); see Shady Grove Or-
thopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 423
20                                 LATURNER v. UNITED STATES

(2010) (Stevens, J., concurring) (“A federal rule . . . cannot
govern a particular case in which the rule would displace a
state law that . . . functions to define the scope of the state-
created right.”); Semtek Int’l Inc. v. Lockheed Martin Corp.,
531 U.S. 497, 503–04 (2001) (noting that if state law
granted a particular right, “the federal court’s extinguish-
ment of that right” through application of a Rule of Civil
Procedure “would seem to violate this limitation” contained
in § 2072(b)).
     The Second Circuit’s decision in Federal Treasury En-
terprise Sojuzplodoimport v. SPI Spirits Ltd., 726 F.3d 62
(2d Cir. 2013), provides an illustration. There, the plaintiff
sought to sue for trademark infringement under the Lan-
ham Act, but could not meet the Lanham Act’s statutory
standing requirement, which “permits only ‘registrants’ to
bring actions for infringement of registered marks.” Id. at
83. The plaintiff was not the registrant but argued that it
could nonetheless bring suit because the real party in in-
terest had ratified the plaintiff’s suit as permitted by Fed-
eral Rule of Civil Procedure 17(a). The Second Circuit held
that the corporation could not use Rule 17(a) “to bypass the
standing requirement” in the Lanham Act. Id. at 83. The
court reasoned that “[t]o enlarge standing [by applying
Rule 17] would extend the entitlement to sue to a new party
that is otherwise unauthorized under the” Lanham Act,
and thus “amount to an improper expansion of the substan-
tive rights provided by the Act.” Id.; see also Eden Toys,
Inc. v. Florelee Undergarment Co., 697 F.2d 27, 32 n.3 (2d
Cir. 1982) (“While [Federal Rule of Civil Procedure 17(a)]
ordinarily permits the real party in interest to ratify a suit
brought by another party, the Copyright Law is quite spe-
cific in stating that only the ‘owner of an exclusive right
under a copyright’ may bring suit.” (internal citation omit-
ted) (quoting 17 U.S.C. § 501(b) (1980))), superseded on
other grounds by Fed. R. Civ. P. 52(a).
    Similarly, here the States cannot use the discovery
rules to bypass the serial number requirement of the
LATURNER v. UNITED STATES                                  21

Treasury regulations. Allowing the States to do so would
improperly expand the substantive right to payment under
the Treasury regulations, since it would extend the right to
receive payment to circumstances in which the claimant
would otherwise not be entitled to payment.
     This is also a situation in which the bond holders have
agreed to the requirements of the Treasury regulations as
part of the bond contract. It is well-established that “before
suit has been filed, before any dispute has arisen,” parties
may waive various rights through contract—even those
based in the Constitution, such as due process rights to no-
tice and a hearing. D. H. Overmyer Co. v. Frick Co., 405
U.S. 174, 184–85 (1972); see also Herman Miller, Inc. v.
Thom Rock Realty Co., 46 F.3d 183, 189 (2d Cir. 1995) (en-
forcing contract provision waiving right to a jury trial). It
follows that even if bond holders might otherwise be enti-
tled to certain discovery, they may limit that right by
agreeing to the terms of the bond contract, which require
them to present the physical bonds or the bond serial num-
bers for payment.
                             III
    Finally, the States assert that Treasury’s denial of
their redemption requests was a “taking” of their property.
The essence of a takings claim is that the government
“takes possession of an interest in property for some public
purpose” and must therefore “compensate the former
owner.” Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l
Planning Agency, 535 U.S. 302, 322 (2002). But here the
government has not taken possession of any interest in the
bonds. The bonds remain the property of the original own-
ers, who under Treasury regulations retain the right to re-
deem the bonds at any time. The States simply do not have
a property interest in the bonds, and, even if they did, they
can have no greater property interest than the original
owners. See A & D Auto Sales, Inc. v. United States, 748
F.3d 1142, 1151 (Fed. Cir. 2014) (“[T]he existence of a valid
22                                 LATURNER v. UNITED STATES

property interest is necessary in all takings claims.” (quot-
ing Wyatt v. United States, 271 F.3d 1090, 1097 (Fed. Cir.
2001)). Because no property interest of the States has been
impaired, there can be no taking.
                       CONCLUSION
    Because the States’ escheat laws attempt to transfer
ownership of the bonds to the States in contravention of
Treasury regulations, they are preempted by Federal law.
In addition, because the States lack the serial numbers or
possession of the bonds at issue, they could not redeem the
bonds even if they validly owned them.
    We reverse the judgment below and remand with in-
structions to enter summary judgment for the government.
                       REVERSED
                           COSTS
     No costs.