Wednesday, November 14, 2018

Ohio Legislative Update (With Some Interesting Stats)

Recently, Ohio passed House Bill 353, which broadens the scope of the current exemptions for gift cards and gift certificates under the unclaimed property act.  Effective January 22, 2019 the bill will exempt certain "open-loop" prepaid cards, "closed-loop" prepaid cards, and rewards cards.  The revised legislation also exempts any "obligation" due to a retail customer (as opposed to just "credits").

As is often the case, a non-partisan legislative committee prepared a "Fiscal Note" regarding the potential economic impact of the new law.  That report, in turn, sets forth the amount of money reported to, and repaid by, the State of Ohio during the most recent five-year period.  For example, according to the Note, holders reported and remitted nearly $300 million to the state during Fiscal Year 2018.  During that same period, the state returned $97 million to owners.  Over the five year period 2014-2018, the state collected $1.4 billion (with a "b") from holders while returning approximately $425 million to owners.

Monday, November 12, 2018

Election Day Roundup -- Meet Your New (and Returning) Escheators

You may not have noticed, given that there was almost no news coverage of it, but this past Tuesday was Election Day in the United States.  While the consequences of that election on national policies are being hotly debated, there were several elections that may impact the future course of unclaimed property policies.  Most state unclaimed property offices are run by an elected State Treasurer (or State Comptroller).  There were several such elections this week.  Among the new (in bold) or returning unclaimed property elected officials are:

Alabama -- John McMillan
Arkansas -- Andrea Lea (Auditor of State)
California -- Betty Yee (State Comptroller)
Colorado -- Dave Young
Connecticut -- Shawn Wooden
Florida -- Jimmy Patronis
Idaho -- Judy Ellsworth
Illinois -- Michael Frerichs
Iowa -- Michael Fitzgerald
Kansas -- Jake LaTurner
Massachusetts -- Deb Goldberg
Nebraska -- John Murante
Nevada -- Zach Conine
New York -- Thomas DiNapoli (State Comptroller)
Oklahoma -- Randy McDaniel
Rhode Island -- Seth Magaziner
South Carolina -- Curtis Loftis
South Dakota -- Josh Haeder
Texas -- Glenn Hegar
Vermont -- Elizabeth Pearce
Wyoming -- Curt Meier

Congratulations to these new officials.

Monday, September 24, 2018

Developing: Jury Rules in Favor of Delaware in "GiftCo" Litigation

Delaware ex rel French v. Card Compliant, et al, has been one of the most closely-watched unclaimed property cases in recent memory.  The case involves a whistleblower claim by a former executive of a so-called "GiftCo" structuring entity, alleging that the "giftco" structure (whereby a company issues gift cards through a subsdiary incorporated in a state that exempts gift cards from the scope of unclaimed property laws) amounts to an improper avoidance of Delaware's escheat laws.

According to a press release issued by the Plaintiff's attorneys, the jury unanimously found that the card issuer violated Delaware law by using a "giftco" structure to circumvent the state's escheat laws.  More information when it becomes available.

Friday, June 15, 2018

An Update on the California Cryptocurrency Unclaimed Property Class Action

In our last post, we mentioned a potential class action against a “digital currency exchange” dealing in Bitcoin and other cryptocurrencies brought by a private plaintiff alleging, among other things, violations of California’s unclaimed property laws.  It appears that specific claim will no longer be at issue in the case.  In mid-May, the defendant, Coinbase, filed a motion to dismiss asking the court to throw out the complaint.  In its motion, Coinbase argued that the plaintiff could not bring a claim against Coinbase for failure to comply with the California Unclaimed Property Act, arguing that such a claim could only be brought by the State Comptroller’s Office.

In response, the plaintiffs amended their claims, and removed the cause of action for violation of the Unclaimed Property Laws.  Coinbase’s response to the amended complaint in due in July.

Monday, May 14, 2018

Cryptocurrency Exchange Hit With Unclaimed Property Class Action

In May of 2010, a Jacksonville software developer named Laszlo Hanyecz made the first purchase of real world goods (2 pizzas) using the cryptocurrency Bitcoin.  Since that time, cryptocurrencies – digital currencies that rely upon computerized cryptography to control monetary flow (i.e., the amount of funds available), approve and record transactions – have become more publicly accepted and risen tremendously in value.   Today, Bitcoin - one of the most widely known cryptocurrencies - can be used to purchase a wide variety of goods at a number of retailers.

As cryptocurrencies such as Bitcoin become more widely accepted, they will also come under the increasing scrutiny from financial regulators, law enforcement agencies, and consumer protection watchdogs.  Indeed, it appears that this is already happening.  Already, the IRS has issued guidance as to when cryptocurrencies will be treated as property for U.S. tax purposes.  On the unclaimed property law front, the 2016 Uniform Unclaimed Property Act includes within the definition of "property" subject to the act "virtual currency," defined as: "a digital representation of value used as a medium of exchange, unit of account, or store of value, which does not have legal tender status recognized by the United States."

More recently, "digital currency exchange" Coinbase has been sued in a potential class action for, among other things, purportedly failing to comply with California's unclaimed property laws.  A digital currency exchange is generally a business where cryptocurrencies can be traded or exchanged for "fiat currency" (i.e., government-issued money).  The class action complaint was filed in a California federal court on behalf of "[a]ll persons and entities who were sent Cryptocurrencies . . . through Coinbase.com to their email address, and who never claimed such Cryptocurrency."  The complaint alleges that, in certain instances, members of the plaintiff class who were sent cryptocurrencies by others through Coinbase were only sent a single email notifying them of the transaction.  The complaint alleges that Coinbase's alleged failure to send follow up emails or escheat the property to the State amounts to a violation of the California Unclaimed Property Act and/or is an unlawful business practice.

Assuming the case proceeds to the merits, it will be interesting to see how the court's attempt to impose the unclaimed property regulatory framework on this type of "asset."  Coinbase's response to the complaint is currently due on May 18, and indications are that it will move to dismiss the complaint.