Wednesday, December 29, 2010

Missouri Introduces Payroll Legislation

Pursuant to both the 1981 and 1995 Unclaimed Property Acts, payroll (e.g., uncashed paychecks and similar items) has a dormancy period of one year (as opposed to 3 or 5 years for many property types).  The one-year dormancy period is the norm in most states, but there are outliers.  Missouri, which currently has a five year dormancy period for payroll, has introduced legislation to join the majority of states using a one-year dormancy period. 

The new legislation, House Bill 64, would shorten the dormancy period for payroll related items to one year, effective January 1, 2012.  The bill has not yet been scheduled for a hearing before the full legislature.

Tuesday, December 28, 2010

Unclaimed Property As State Revenue: A Warning from North Carolina

We've spent more than a few posts here talking about the states' use of unclaimed property as general revenue until such time as it is claimed by its rightful owner.  More recently, we've seen Connecticut erase its deficits through increased unclaimed property collection, and Michigan change its unclaimed property laws in an attempt to balance the state budget.  Of course, as any state administrator of unclaimed property will tell you (with varying degrees of honesty) unclaimed property does not belong to the state, it is simply held in trust for the rightful owner.  That fact - that the property is subject to reclaim at any time - is one of the biggest drawbacks of the states' increasing reliance on unclaimed property as state revenue.

A recent story from North Carolina underscores the problems that occur when the unclaimed property well starts to run dry.  Pursuant to North Carolina law, the monies derived from investment of escheated property is used for need-based education grants for North Carolina students.  This use of funds has a long pedigree, dating back to a 1789 constitutional provision providing for the transfer of escheated lands to the University of North Carolina.  Now, however, according to a recent article from The Charlotte Observer, however, an increase the need for such grants is emptying the escheats fund.  If more money is not found (through cost cutting or an increase in escheat-related revenue) cuts to the grant program could be forthcoming.

As states increasingly rely upon unclaimed property (as well as other non-certain sources of revenue) as part of the state budget, such cuts and shortfalls will continue to happen.

Monday, December 27, 2010

Virginia Guidance Regarding "Promotional Incentives"

Now that we're back from the holidays, it's time for most people to deal with the unintended consequences of the gift giving season:  rebates and returns.  While the latter is generally straightforward (to the extent that waiting upon an endless customer service line is straightforward) rebates can be trickier, for both consumer and unclaimed property professional.  For the consumer, there are several different considerations, depending upon the type of rebate:  mail-in or online; cash back or future purchase; etc.  To say nothing of special forms, expiration dates, and proofs of purchase.

For unclaimed property professionals, things are similarly complicated.  In some states, such as Virginia, there are unclaimed property exemptions for rebates and other "promotional incentives."  See Virginia Code Section 55-210.8.  However, there is generally some confusion among holders as to what these exemptions cover.  To provide some clarity, the Commonwealth of Virginia issued a memo to provide holders with guidance as to the scope of this "promotional incentives" exemption.

In sum, the memo emphasizes that no matter whether an item is labeled a "rebate" or not, holders seeking to invoke the promotional incentives exemption must meet a two part test:

1.  The incentive must be designed to influence the consumer to purchase goods and services; AND
2.  The consumer must provide no consideration, or less consideration than the value of the incentive.

The memo goes on to give a few examples of rebates that are, and are not, covered by the exemption.  Holders with Virginia rebates should read the memo in full.  For others, it is a timely reminder that labels are not determinative when it comes to unclaimed property.

Friday, December 24, 2010

Did You Know? Holiday Edition

It's time again for Did You Know?  On Fridays here at Escheatable, we provide you with interesting information regarding the unclaimed property laws to amaze your friends and frighten your enemies.

You had to see this coming, right?

We've spent a fair amount of time here at Escheatable marveling over all the people and entities that are owed unclaimed property, and by whom.  The Yankees are owed money from New York.  The State of California is owed money by the State of Delaware (as well as by *ahem* California).  In light of all that, it should perhaps be no surprise that the State of Wisconsin is holding unclaimed property for this gentleman.

Merry Christmas everyone!

Thursday, December 23, 2010

Breaking News: New Jersey Gift Card Rules Further Postponed Until 1/18

A quick update on the continuing New Jersey gift card law litigation.  As you probably know, a variety of New Jersey gift card issuers filed a lawsuit in federal court, seeking to have parts of New Jersey's new gift card law overturned.  Last month, the a federal court in New Jersey issued a preliminary injunction prohibiting the state from enforcing at least two provisions of the new law: (1) the law's presumption that all cards sold in New Jersey are escheatable to New Jersey; and (2) the law's requirement that merchandise-only gift cards issued prior to the act be escheatable in cash.

We say "at least" two provisions of the law have been enjoined because the parties to the lawsuit are currently disputing the scope of the federal court's injunction.  In particular, the parties disagree as to whether the new law's requirement that gift card issuers obtain purchaser or owner zip code information is enforceable.  New Jersey takes the position that the zip code requirement is unaffected, the issuers take the position that the provision can't be enforced.  An application has been made to the court to settle the dispute, but no decision has been made.

As you may have noticed, this happens to be a busy time for gift card issuers.  In light of the uncertainty, the New Jersey Attorney General's Office filed a letter with the federal court yesterday, which informs the court that "the Treasurer has extended the date for issuers to implement a system or process capable of recording and maintaining the purchaser's zip code until no earlier than January 18, 2011."

A formal announcement should be forthcoming from the Treasury Department

Wednesday, December 22, 2010

Connecticut Digs Out of Deficit Using Unclaimed Property (at least, for now)

In a December 1, 2010 budget forecast to the governor, Connecticut comptroller Nancy Wyman projected that the state would run an $18 million deficit for the current year.  Now, however, according to the Connecticut Mirror, a substantial increase in the amount of unclaimed property collected by the state may result in a budget surplus.  Specifically, according to the State Treasurer's office, Connecticut has brought taken custody of more than $92 million in unclaimed property (compared with a projection of $50 million).

The article also notes, however, that claims for the first 5 months of the fiscal year are more than double that of this time last year, suggesting that any budget relief may be temporary.  This, we suppose, is to be expected.  As states continue to shorten dormancy periods and become more and more aggressive in requiring holders to report and remit unclaimed property, they will take custody of more and more property that is not "really" abandoned.  Accordingly, attempts to leverage more restrictive unclaimed property laws into additional state revenue are inherently limited by the owners' largely unconditional right to reclaim the funds.

Thursday, December 9, 2010

Programming Note: Off Until 12/21

Quick programming note:  Escheatable will be off until December 21.  If there are any tips or breaking news that can't possibly wait until then, drop us a line at admin at escheatable dot com.

Tuesday, December 7, 2010

South Carolina Holds Online Unclaimed Property Auction

Add another entry to the list of recent articles here (and here, here, and here) about unclaimed property auctions.  The Unclaimed Property Division of South Carolina began an online unclaimed property auction yesterday.  Pursuant to the South Carolina Unclaimed Property Act, unclaimed property that has been held by the state for at least 3 years may be sold to the highest bidder at a public sale.  (S.C. Code Section 27-18-230).

Granted, most readers of Escheatable are sending out unclaimed property, not bringing it in.  But, if you are in the market for a set of sterling Christmas ornaments or a Morgan Dollar belt buckle this holiday season, be sure to check it out.

Monday, December 6, 2010

How We Got Here - In 30 Lines or Less

This past weekend the Abilene Reporter-News published an article providing an overview of Texas unclaimed property law, and encouraging readers to check with the Texas Comptroller of Public Accounts to see if they are owed some of the $2.2 billion of unclaimed property being held by the state.

Far more interesting to Escheatable, however, was the accompanying timeline of the history of unclaimed property laws.  In just 27 lines, you can learn how the escheat laws developed from the time of Ancient Rome to today (with stopovers in England, the U.S. Supreme Court, and Texas).  It is worth reading.

Friday, December 3, 2010

Did You Know? Fred Clarke's Secretary Edition

It's time again for Did You Know?  On Fridays here at Escheatable, we provide you with interesting information regarding the unclaimed property laws to amaze your friends and frighten your enemies.  Today's entry is from Nevada:

And how much am I bid for the postcard signed by Fred Clarke's Secretary?

Tomorrow, the Nevada Unclaimed Property Division is holding an unclaimed property auction.  According to the Auction Catalog, one of the items up for auction is a "Fred Clark[e] baseball post card, non-malicious secretarial signed version." Fred Clarke, who was inducted into the Baseball Hall of Fame in 1945, was an outfielder for the Louisville Colonels and Pittsburgh Pirates, and was one of the original "boy managers" (or player-managers).  According to James Spence Authentication, the "non-malicious secretarial signed version" of his postcard means that this item was not signed by Mr. Clarke himself (who, as you may know, is 7th all time in career triples), but was signed by Mr. Clarke's secretary, or someone acting on his behalf.

You never know what you might find.  Happy bidding!

Wednesday, December 1, 2010

Industry Spoke, Goverment Listened - Changes to the Cayman Dormant Accounts Law

A few months ago, we reported some unclaimed property developments in the Cayman Islands.   The Cayman government enacted the "Dormant Accounts Law," which established a 6 year dormancy period for most items, and provided that all dormant funds would be held for the "general revenue of the Islands."  As noted in the original Cayman News Service article, a number of holders were particularly concerned about the length of the dormancy period as well as DAL's notice provision, which provided that in situations where "the financial institution has been instructed by the dormant account holder not to correspond with or contact the dormant account holder" the financial institution is required to publish notice of the "nature and type of such dormant accounts" in "one or more daily newspapers circulating in the Islands . . . [and] any other media as the financial institution deems necessary."  (Dormant Accounts Law, Section 6(1)).

Recently, the Cayman government responded to these concerns and amended various provisions of the DAL.  In particular, the dormancy period under the Law was lengthened from 6 years to 7 years, and makes clear that once property is turned over to the government, it will be held in trust for an additional six years.  The amendments also change the notice requirements.  Notice of unclaimed property held for a Cayman resident is still subject to newspaper publication, but property held by a financial institution for a non-resident need only be published on the "account provider's website or in a register held at the principal office of the account provider in the Cayman Islands."  (Dormant Account (Amendments) Bill 2010, Section 5(a)).

Escheatable - Your Premier Source of Caribbean Unclaimed Property Information (catchy?)

Tuesday, November 30, 2010

Massaschusetts Authorities Probe Attempted Unclaimed Property Theft

According to an article in the Worcester Telegram & Gazette, a Massachusetts man has been indicted for attempted to wrongfully claim approximately $1.5 million in unclaimed property, by posing as the heir of a deceased doctor.  Specifically, the defendant is alleged to have presented false will, trust and unclaimed property claim forms to the Massachusetts Treasurer's Abandoned Property Division.  Division employees were apparently tipped off to the potential fraud because of a number of discrepancies in the signatures and notarization of the documents.

One question this raises is how the defendant knew that this particular deceased individual had a significant amount of unclaimed property to begin with.  The Massachusetts Abandoned Property Database, like most states' registries, does not list the amounts held for a potential claimant, precisely to prevent this type of fraud.

Monday, November 29, 2010

Utah Proposed Regulation Relating to Real Estate Deposit Funds

Utah is considering a substantial reorganization to its existing real estate licensing rules.  As part of that reorganization, the new regulations would include a provision providing that unclaimed trust deposits held by a real estate broker as a result of a cancelled or failed real estate transaction would be subject to the provisions of the Utah Unclaimed Property Act.

Anyone wishing to comment on the proposed rule has until December 15th to do so.  Comments should be provided to the Utah Department of Commerce, Division of Real Estate.

Wednesday, November 24, 2010

Happy Thanksgiving!

Escheatable is taking the rest of the week off in celebration of the Thanksgiving holiday.  Best wishes to all of you and your families.

Tuesday, November 23, 2010

IRS Announces $164.6 Million in Unclaimed Tax Refunds

Last week, the Internal Revenue Service issued a press release disclosing that it currently has in excess of $160 million in tax refunds that could not be delivered to taxpayers (primarily because of mailing errors). 

Interestingly (or perhaps not) unclaimed federal tax refunds are not reported and remitted as unclaimed property, because under federal law:

No overpayment of any tax imposed by [the Internal Revenue Code] shall be refunded (and no interest with respect to such overpayment shall be paid) if the amount of such refund (or interest) would escheat to a State or would otherwise become the property of a State under any law relating to the disposition of unclaimed or abandoned property.

Source:  26 U.S.C. 6408.

Accordingly, taxpayers who believe that they are missing refunds should contact the IRS via the "Where's My Refund" tool on the IRS website.

Monday, November 22, 2010

Michigan Issues Notice Regarding Unclaimed Property Law Changes

The Michigan Department of Treasury recently issued a notice reminding holders of the new dormancy periods and reporting dates for 2011. 

Earlier this fall, as part of its attempts to balance the state budget, Michigan enacted sweeping changes to the state unclaimed property law.  Pursuant to the new law, the dormancy period for most property types was reduced from 5 years to 3 years, and significant changes were made to the holder reporting process.  The prior version of the law required an unclaimed property report to be filed and property delivered by November 1 for the year ending June 30.  The new law leaves that deadline in place, but adds the following reporting dates:

  • In 2011, a report shall be filed on or before July 1, 2011 for the 9-month period ending on March 31, 2011. 
  • For years ending after 12/31/2011, the report shall be filed on or before July 1 of each year for the 12 month period ending on the immediately preceding March 31.
Accordingly, even though most holders filed reports with the state a few weeks ago, for property deemed unclaimed as of June 30, 2010, another report is due July 1 of this year for property deemed abandoned during the period July 1, 2010 through March 31, 2011.  Michigan reporting will thereafter switch to the July 1 date (and will be the only state to have such a deadline).


 More information is available at the Unclaimed Property Division's website.

Thursday, November 18, 2010

Spike TV's Auction Hunters: Unclaimed Property Comes to Realty TV

We have reality TV shows relating to (the New York) residents of the Jersey ShoreLeonardo Da Vinci, and famous (if underachieving) wide receivers, so why not one relating to unclaimed property?  Spike TV's new show Auction Hunters follows two "prospectors" who bid on abandoned storage units in an attempt to sell the contents for more than was bid.  Escheatable was unfamiliar with the process for auctioning storage units, but according to Spike's website:

 You and the other bidders will then line up in front of the first of what is likely several units up for auction.  Next, the auctioneer will throw open the unit's door.  Each bidder will briefly file past the open unit, leaving you only a matter of seconds to look and only look into the unit.  No touching allowed!  Once those precious seconds are over, you're done and that's why these short moments are so important.  You need to make a lightning fast assessment as to what the contents might be, and how much are you willing to bid.  Once everyone has had their look, bidding begins.  It can start as low as $1 or go as high as several thousand.  After being declared the winner, you will typically have up to 24 hours to clean out the unit or be forced to pay a financial penalty.

The obvious question (at least to us) is, isn't this unclaimed property?  Generally, yes and no, depending upon the storage unit contract.  In most instances, the storage unit contract or some states' laws specifically provide that the storage company can auction off the contents in order to be reimbursed for unpaid fees.  If the amount received, however, is greater than the amount due, the excess may be unclaimed property subject to reporting and delivery (at least according to some states and state laws).

Tuesday, November 16, 2010

Breaking News: Federal Court Enjoins Parts of NJ Gift Card Law

A few weeks ago, we reported on the NJ Retail Merchants Association's lawsuit against New Jersey in response to that state's new unclaimed property laws relating to gift cards.  As we covered earlier, the NJRMA challenged various provisions of the NJ legislation (the "Bill," discussed here) including the provisions presuming NJ reportability for cards sold in NJ locations or in NJ zip codes (the "Location Presumption") and the requirement that issuers turn over the full face value of cards inactive for 2 years (the "Face Value Requirement").  The NJRMA also challenged the retroactivity of the bill (i.e., the law's application to cards that were issued years before the bill was enacted). 

Similar lawsuits were filed against the state by the New Jersey Food Council and American Express Prepaid Management as to the gift card provisions.  Lawsuits have also been filed by American Express (challenging new laws relating to travelers' checks) and Memo Money Order Company (challenging the shortened dormancy period for money orders).  These plaintiffs all sought a preliminary injunction -- that is, an order preventing NJ from enforcing the Bill -- until the court can issue a final ruling.  The State opposed these requests, and asked the court to dismiss the case.

On November 12, the federal district court issued an opinion and order in connection with the plaintiffs' request for a preliminary injunction.  The court has enjoined the state from enforcing the Location Presumption, and from applying the Face Value Requirement to cards issued prior to the effective date of the Bill.  The court declined, however, to stop the state from enforcing the new 2 year dormancy period for stored value cards, or from shortening the dormancy period for travelers' checks.  This does not represent a final ruling on any of these issues.  Instead, it is a preliminary determination that prevents NJ from enforcing the Location Presumption or the Face Value Requirement (retroactively) until a final decision is made.

We will continue to follow the case.

Monday, November 15, 2010

Unclaimed Property in the Eastern Carribean (No, Not Pirate Treasure)

Though we spend most of our time here discussing unclaimed property laws and procedures at it involves the United States, it should be noted that escheat agencies and procedures exist - or are being established - all over the world.  Recently, we spent some time discussing the new Cayman Islands' Dormant Accounts Law, but other Caribbean institutions have similar rules.

For example, the ,Eastern Caribbean Central Bank the monetary authority for Anguilla, Antigua and Barbuda, the Commonwealth of Dominica, Grenada, Montserrat, St Kitts and Nevis, St Lucia, and St Vincent and the Grenadines, maintains a list of Abandoned Property Holders listing dormant accounts being held by those islands' regulated financial institutions.  We here at Escheatable are looking forward to going down to the ECCB to personally inspect the process. 

Friday, November 12, 2010

Did You Know?

It's time again for Did You Know?  On Fridays here at Escheatable, we provide you with interesting information regarding the unclaimed property laws to amaze your friends and frighten your enemies.  Today's entry is from Oregon:

I'll have a beer.  And may I see your book of consigned baggage?

According to Oregon law, "When personal property is consigned to or deposited with . . . [a] tavern keeper . . . [he or she] shall immediately cause to be entered in a book kept by the consignee or bailee a description of such property, with the date of its reception."

Or. Rev. Stat. 98.110

Thursday, November 11, 2010

Meet Your (New) Escheator - Elections Have Impact on Unclaimed Property Administrators (Part 2 - Nebraska to Wyoming)

We continue our two part series on the election results and new (or newly-reelected) state unclaimed property executives.  We are going alphabetically; part one covering Alabama through Massachusetts, can be found here

We begin part two with Nebraska.  As we mentioned earlier, Cornhuskers at the polls actually had two Treasury-related decisions to make.  First, who to elect as State Treasurer, and second, whether or not to keep the office of State Treasurer altogether.  By an overwhelming margin, Nebraskans decided to keep the position.  Congratulations to Don Stenberg, who gets (and gets to keep) the job.

Your other winning state escheators are as follows (Individuals listed are newly-elected, or reelected, State Treasurers unless another position is specified):

Nevada - Kate Marshall
New Mexico - James B. Lewis
New York - Thomas DiNapoli (State Comptroller)
Ohio - Josh Mandel
Oklahoma - Ken Miller
Rhode Island - Gina Raimondo
South Carolina - Curtis Loftis
South Dakota - Rich Stattgast
Texas - Susan Combs (Comptroller of Public Accounts)
Vermont - Jeb Spaulding
Wisconsin - Kurt Schuller
Wyoming - Joe Meyer

Congratulations to all those elected or re-elected.  If we missed a state, contact us at admin at escheatable dot com.

Wednesday, November 10, 2010

Meet Your (New) Escheator - Elections Have Impact on Unclaimed Property Administrators (Part 1 - Alabama to Massachusetts)

As you may have heard, there were elections last week all over the country.  While most of the press was following the top-ticket federal and state races, we at Escheatable are more interested on how the elections may affect unclaimed property administration.  From coast-to-coast, dozens of states held down-ticket elections for the constitutional or statutory officers responsible for administering state unclaimed property programs.  As we mentioned earlier, state unclaimed property efforts even became an issue upon which incumbents (or their opponents) campaigned.  The dust has now settled, and we're ready to meet your escheators.  Today, we cover Alabama through Massachusetts.

(States with 2010 general elections only.  Individuals listed are newly-elected, or reelected, State Treasurers unless another position is specified).

Alabama - Young Boozer III
Arizona - Doug Ducey
Arkansas - Charlie Daniels (this one not this one, Auditor of State)
California - John Chiang (State Controller)
Colorado - Walker Stapleton
Connecticut - Denise Nappier
Florida - Jeff Atwater (Chief Financial Officer)
Idaho - Ron Crane
Illinois - Dan Rutherford
Iowa - Michael Fitzgerald
Kansas - Ron Estes
Maryland - Peter Franchot (Comptroller)
Massachusetts -Steve Grossman

Tomorrow, we will cover Nebraska through Wyoming.

Tuesday, November 9, 2010

New Hampshire Court Dismisses Lawsuit Challenging State Reuinification Efforts

A New Hampshire court has dismissed a lawsuit challenging the methods for giving notice.  Pursuant to the New Hampshire unclaimed property act, the state attempts to contact owners of unclaimed property via mailings, an online database, and by publishing owner names in the New Hampshire Union Leader

Two plaintiffs, Kimberly Blain and Joe King's Shoe Shop, claimed that the state's efforts to notify owners was insufficient and argued that the state had an interest in not locating owners: namely, the approximately $4.4 million that winds up as state revenue as a result of the abandoned property program. 

The court ruled that while the state's efforts might not be optimal, they did not rise to the level of a deprivation of the owners' constitutional rights. 

Monday, November 8, 2010

New York Case Underscores Need for Internal Controls

A recent article in the Albany Times-Union about the appeal of a federal bank fraud conviction also contains an important reminder for the unclaimed property community.  The underlying fraud conviction was based upon 3 individuals' allegedly wrongful transfer of more than $2.4 million in bank-held unclaimed property to accounts controlled by the defendants.  One of the defendants was a bank employee who apparently had access to the unclaimed accounts, and made fraudulent payouts to the other defendants.

While most unclaimed property professionals are primarily concerned with the "ends" of the unclaimed property pipeline (that is, making sure all dormant items get flagged for inclusion in the unclaimed property systems, and making sure all unclaimed property gets properly reported) this article is a good reminder that property must be safeguarded while it is the the process as well.   

Friday, November 5, 2010

Did You Know?

It's time again for Did You Know?  On Fridays here at Escheatable, we provide you with interesting information regarding the unclaimed property laws to amaze your friends and frighten your enemies.

Here We Go Again - It's the Thirty-First State.  The State Flower is the Poppy.  The State Grass is the Purple Needlegrass.  The State Fossil is Smilodon Fatalis.

Yesterday, we noted that Delaware published its annual list of unclaimed property, and that many of the listed owners are not Delaware residents.  A search of the Delaware database shows that Delaware is holding money owed to the State of California.  Delaware shouldn't feel bad.  After all, it's not the only state having trouble finding California.

Thursday, November 4, 2010

Delaware Publishes Unclaimed Property Owners' List - Why The World Should Be Watching

On October 29, Delaware published its annual list of unclaimed property holders.  Sure, residents of "The First State" should care, but companies all over the world too?  Sure.  Here's why:

Many items of unclaimed property arise from interstate or international commerce.  For example, a Delaware incorporated entity, headquartered in New York, may issue a check to a New Jersey resident for work performed in Connecticut. 

Obviously, since there are many states involved in this transaction, there needs to be some set of rules to determine which state has first priority to take custody of any unclaimed property.  Those rules were set down by the U.S. Supreme Court in 1965 in a case called Texas v. New Jersey.  In that case, the Supreme Court held, as a matter of federal common law, that first priority to take custody of unclaimed property belongs to the state of the rightful owner's last known address (in our example above, that would be New Jersey).  The court further ruled that in situations where the holder does not know the owner's last known address, the next priority to claim the property belongs to the holder's state of domicile (i.e., its state of incorporation).  Those rules have been repeatedly reaffirmed by the Supreme Court, most recently in the 1993 decision of Delaware v. New York.

Why is this important?  Most states (including Delaware) have self-expanded these priority rules to cover foreign unclaimed property.  Though neither Texas v. New Jersey nor Delaware v. New York set forth any rules to cover the situation where property is owed to a non-U.S. resident, many states take the position that unclaimed property belonging to a non-U.S. owner is escheatable to the holder's state of incorporation.  Because Delaware is a state of incorporation for thousands of U.S. companies (including much of the Fortune 500) a tremendous amount of unclaimed property belonging to non-U.S. individuals and residents gets reported to Delaware on an annual basis. 

Accordingly, a review of Delaware's annual unclaimed property list has information relating to hundreds of non-U.S. residents and entities that are owed unclaimed property being held by the State of Delaware.  Indeed, many (perhaps even a majority) of the entries listed are for non-U.S., not Delaware, owners.  Thus, Companies with significant overseas operations or businesses should review the list, even if they have no Delaware operations.

Wednesday, November 3, 2010

More on the New Jersey Litigation - Money Order Issuers Join The Act

Regular readers of Escheatable have already heard plenty (perhaps too much) about New Jersey's new unclaimed property legislation this summer and the resulting lawsuits.  As you may recall, New Jersey shortened the dormancy period for both travelers' checks and money orders to 3 years (down from 15 years, and 7 years, respectively) and created a 2 year dormancy period for stored-value cards.  Thereafter, New Jersey was promptly sued by travlers' check and gift card issuers to prevent the new law from going into effect.

Not to be outdone, at least one money order issuer is joining the fray.  On October 21, Memo Money Order Company, Inc. ("Memo") -- a Pennsylvania issuer of money orders -- sued New Jersey in federal court seeking an injunction to prevent application of the new law (Case No. 3:10-cv-05460).  As have others, Memo alleges that the New Jersey law, and its retroactive application, violates Memo's 14th Amendment due process rights, constitutes an unlawful taking of property, violates the federal and state Contract Clauses, and is invalid under the New Jersey Constitution.

The Memo lawsuit is on a slightly different track than the travelers' check and gift card cases.  A decision on the latters' request for a preliminary injunction is expected by mid-November and will likely go a long way toward deciding this case as well.

Tuesday, November 2, 2010

Unclaimed Property Makes An Appearance on the Campaign Trail

First of all, congratulations to all on finishing another fall reporting period.  We take a break from the detail-oriented process of annual reporting to look at the big picture.  In particular, the role of unclaimed property in state politics and its affect on various races throughout the country.  As one might imagine, those responsible for administering state unclaimed property programs are quick to tout the successes of the program.
In California, Nevada, and Wisconsin, for example, the incumbents are campaigning on how successful they have been at reuniting citizens with unclaimed property. 

In Massachusetts, the candidates for the position of State Auditor sparred over the hiring of "inexperienced" unclaimed property auditing firms, which allegedly cost the state $16 million dollars, and whether a CPA license should be a requirement of that office. 

In Nebraska, however, voters will decide whether to get rid of the State Treasurer completely.  Specifically, legislation passed by the state senate in Nebraska proposes eliminating the position state treasurer -- who, among other things, administers the state unclaimed property department -- as of January, 2015.  The legislation does not specify what state entity would administer the unclaimed property office upon abolishing the office of State Treasurer.  Notwithstanding the office's potential demise, there are at least 2 Nebraskans still interested in the job.

Don't forget to vote today!

Monday, November 1, 2010

It's Reporting Day

It's early November; the phone calls have been made; the mailings have gone out, the pollsters have had their say.  Now, its time for the moment of truth.  That's right, unclaimed property reports are due today (or 10/31) in 43 jurisdictions*. 

A "best of luck" and a sigh of relief to unclaimed property managers and reporters everywhere.  Take a break; you deserve it.  Just don't break too long -- Delaware reports are due in March.

*  Alabama, Alaska, Arizona, Arkansas, California, Colorado, D.C., Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin and Wyoming.

Monday, October 25, 2010

Lure of Escheat Too Much for 87 Alleged Criminals

Never underestimate the draw of unclaimed property . . .

According to a report by the Patriot-News of Central Pennsylvania, Dauphin County, PA law enforcement officials arrested 87 people who had outstanding warrants by asking them to report to a county agency to obtain unclaimed property.  According to the article, police enticed the wanted men to round themselves up by sending suspects a letter from the "fictitious" Department of Unclaimed Property and arrested them when they came to collect.

Friday, October 22, 2010

Did You Know?

It's time again for Did You Know?  On Fridays here at Escheatable, we provide you with interesting information regarding the unclaimed property laws to amaze your friends and frighten your enemies.  Today's entry is from California:

This is our new jungle gym.  It's made entirely out of gold, jewels and empty safe deposit boxes.

Pursuant to California law, the Director of Parks and Recreation may "examine any tangible personal property" delivered to the Controller as unclaimed property to determine whether such property would be "useful" to the Parks Department.

Source:  Cal. Code Civ. Proc. Section 1567.

Wednesday, October 20, 2010

Guidance on Vermont's Limitation of Lookback Provision

The State of Vermont is currently soliciting proposals from vendors to perform unclaimed property auditing services for both in-state and out of state holders.  While the RFP itself is not readily available, the State Treasurer's Office did issue some guidance concerning the state's "limitation of lookback period" in response to a question from a prospective applicant.  As many holders of unclaimed property know, there is no statute of limitations on the state's right to take custody of unclaimed property.  Most states' unclaimed property laws, however, have so-called "limitation of lookback" provisions that place restrictions on the state's right to audit a holder.  For example, the relevant provision of the Vermont Unclaimed Property Act provides that

"An action or proceeding may not be maintained by the treasurer to enforce this chapter in regard to the reporting, delivery, or payment of property more than 10 years after the holder specifically identified the property in a report filed with the treasurer or gave notice to the treasurer of a dispute regarding the property."

One of the Vermont RFP applicants sought clarification regarding the state's interpretation of this provision, and asked: 


Under Vermont Statute (Vt. Stat. Ann. Title 27 § 1259(b)), there is a ten year statutory limitation on the Treasurer’s right to bring an action or proceeding to enforce the Unclaimed Property Law. How is the examination’s reach back period treated for Vermont? Is it ten years based on this statute? If so, does this include the dormancy period(s)? Also, if holder failed to file reports, how far back is the reach back period for this scenario?

The State's response was as follows:

The examination look back period is ten reporting years. The ten years does not include the dormancy period. For all property it would be 10 years plus the dormancy period. For example, a payroll check issued in 1999, becoming dormant in 2000 and reportable in 2001, would be included on the examination. If a holder has failed to file reports, the reach back period would be determined on a case by case basis, but usually is ten reporting years.

Thus, holders subject to audit by the State of Vermont should expect the scope of that audit to be thirteen years for most property types (i.g., the 10 year lookback plus the 3 year dormancy period for most property types).  A copy of the question, and Treasury's response, can be found here.

Tuesday, October 19, 2010

Ding! You Have Money!

While unclaimed property holders all over the country are busily preparing annual unclaimed property reports
for the 40+ states with fall/winter deadlines, other states are likewise busy trying to return property to owners.  For example, Missouri has just announced an E-mail notification program for unclaimed property whereby Show-Me-Staters (or former Show-Me-Staters) can provide the State Treasurer's office with their current and former Missouri addresses and they will receive email notification when the state comes into custody of unclaimed property owed to that person.

Separately, in Pennsylvania, the State Treasurer issued a press release to highlight nearly $600,000 in unclaimed property owed to Police, Fire Departments and EMS agencies. 

As states continue to expand their escheat laws to funnel an ever-increasing scope and volume of unclaimed property into state coffers, its nice to see other states similarly expanding their owner reunification programs.

Monday, October 18, 2010

More NJ Gift Card Legislation

Over the past week, the New Jersey State Legislature has continued its activity in the area of stored-value cards and unclaimed property:

Assembly Bill 3330 - This bill would require a gift certificate or gift card to be redeemable at full face value in perpetuity.  The bill also creates a definition for a "store gift card" (generally, a "closed loop" card that is redeemable at a single establishment or group of establishments) and provides that the issuers of such cards must (1) on request, disclose to the consumer the full remaining value of the card; and (2) permit a transaction for less than the full amount outstanding.  (As a practical matter, it is unclear if there are any retail establishments that currently fail to perform these functions).

The bill was introduced on October 7, and is currently pending before the Assembly Consumer Affairs Committee.

Assembly Bill 3372 - This bill creates a definition of a "merchandise credit" for purposes of the New Jersey Consumer Protection Law, as something distinct from a gift certificate or gift card.  The legislation defines "merchandise credit" as "any credit provided to a consumer, upon the return of a previously purchased item, of a specified amount which may be spent at the retail mercantile establishment in lieu of returning payment in the form in which it was originally made."

The bill further provides that such credits shall not be permitted to expire within 2 years after issuance and that no fees may be assessed against such credits during that 2 year period.

The bill was also introduced on October 7, and is pending before the Assembly Consumer Affairs Committee.

Friday, October 15, 2010

Did You Know?

It's time again for Did You Know?  On Fridays here at Escheatable, we provide you with interesting information regarding the unclaimed property laws to amaze your friends and frighten your enemies.  Today's entry is from Kentucky.

Does it take four of them to make a whole horse?

Funds representing winning tickets from quarter horse racetracks are subject to the Kentucky Unclaimed Property Act.

Source:  Ky. Rev. Stat. 393.095

Thursday, October 14, 2010

UPPO to Host Stored Value Card Seminar

The application of the unclaimed property laws to stored value cards, such as gift cards, is one of the most complex and rapidly changing areas of the law.  It seems that there is a new development every week that adds or changes the legal obligations of stored value card issuers (for evidence, see here, here, here, and here). 

Against this rapidly changing landscape, the Unclaimed Property Professionals' Organization is hosting a webinar called "Cards, Cards, Cards" on November 9th.  During this webinar, the panelists will explain the basic types and uses of stored value cards, how (and which) state unclaimed property laws apply to gift card programs, and address the recent federal developments in this area.  Registration information is available at http://www.uppo.org/.

Wednesday, October 13, 2010

Unclaimed Property Inferno Comes to Corporate Paradisio: Cayman Islands and the Dormant Accounts Law

Earlier this summer, the government of the Cayman Islands passed "A Law to Provide for the Monies in Dormant Accounts to be Transferred to the General Revenue of the Islands" -- in other words, an unclaimed property law (Law 28 of 2010).   Generally, accounts held in financial institutions that have been dormant for 6 years, are to be reported and remitted to the government, where they are thereafter held for the "general revenue of the Islands."  (Dormant Accounts Law, Sections 4(1) and 7(1).  As with most U.S. unclaimed property laws, once the financial institution has turned over the funds, the owner no longer has a claim against the financial institution, but rather, must try to claim the funds from the government.  (Dormant Accounts Law, Section 9(1)(a) & (b)). 

Another regular feature of U.S. escheat laws that appears in its Cayman counterpart is due diligence requirements -- i.e., attempts by the holder to contact the owner before turning over seemingly unclaimed money.  The Cayman law, however, has a unique feature.  In those instances where "the financial institution has been instructed by the dormant account holder not to correspond with or contact the dormant account holder" the financial institution is required to publish notice of the "nature and type of such dormant accounts" in "one or more daily newspapers circulating in the Islands . . . [and] any other media as the financial institution deems necessary."  (Dormant Accounts Law, Section 6(1)).

Unsurprisingly, some financial institutions and others are none too happy about the new law, including the publication requirement.  According to one legislative committee, the requirement of publishing account details “would be a great cause of consternation for most banks and trust companies involved in private wealth management and would be a deterrent to any clients of the licensees wanting to have their affairs managed through the Cayman Islands . . . ."

Also interesting is the legislative committee's response to breadth of the new law (which is actually narrower than many U.S. states' laws), wherein the committee opined that because the law “could cover any type of asset or property held by a financial institution ... the logistics of monitoring such assets for the purposes of dormancy are inconceivable . . . ."  Accordingly, the committee intends to suggest a new law that will be designed to cover "truly dormant" property, but not affect long-term investment vehicles.  We will review the new law when it's enacted.  In the meantime, the Cayman kerfuffle is a valuable reminder to those who deal with unclaimed property that the scope and requirements of the express terms of the law are generally surprising to those who don't come across them on a regular basis. 

Tuesday, October 12, 2010

NJ Issues Money Order Reporting Instructions

A less-discussed provision  of New Jersey's recent unclaimed property amendments (perhaps because it is the only one the state is not currently being sued over) is the state's decision to shorten the dormancy period of money orders and similar written instruments from 7 years to 3 years.

The NJ Treasury Department issued additional guidance on the reporting of money orders last week, which can be found here.  As noted, all unredeemed money orders issued prior to July 1, 2007 are due in this year's report, and there are certain additional reporting requirements for instruments that have been subject to dormancy fees (basically, a copy of the contract authorizing the fee, and a representation from the company that such charges are not reversed or otherwise canceled).

Friday, October 8, 2010

Did You Know? - Seriously?

It's time again for Did You Know?  On Fridays here at Escheatable, we provide you with interesting information regarding the unclaimed property laws to amaze your friends and frighten your enemies.  Today's entry is from Mississippi.

Maybe They Thought The Claim Process Would Take Too Long

You may recall that a few weeks ago, we noted - with some surprise - the fact that the California Controller's Office was holding unclaimed property owed to various agencies of the State of California.  It seems we were too hard on the Golden State.  According to a recent search, the Mississippi Unclaimed Property Division is holding property owed to . . . (yes, you know what's coming) . . . the Mississippi Unclaimed Property Division.

Thursday, October 7, 2010

Michigan Unclaimed Property Changes Become Law

As widely expected, the Governor of Michigan signed into law House Bill 6421, which enacts sweeping changes to the Michigan unclaimed property act.  Most significantly, this law changes the dormancy period for most property types from 5 years to 3 years.  Michigan - which is required by state constitution to pass a balanced budget - hopes that this reduction in dormancy period will increase state revenue by tens of millions of dollars.

In addition to the dormancy period changes, HB 6421 makes changes with regard to holder reporting.  Generally, Michigan requires an unclaimed property report to be filed and property delivered by November 1 for the year ending June 30.  HB 6421 leaves that deadline in place, but adds the following reporting dates:
  • In 2011, a report shall be filed on or before July 1, 2011 for the 9-month period ending on March 31, 2011. 
  • For years ending after 12/31/2011, the report shall be filed on or before July 1 of each year for the 12 month period ending on the immediately preceding March 31.
Interestingly, the one change made by the Senate to the bill as it proceeded through the state legislature was to delete that portion of the bill that would have shortened the dormancy period for travelers' checks from 15 years to 3 years.  (The Senate markup is available here).  It is likely that had such a provision passed, American Express might have sued Michigan in addition to New Jersey.

Wednesday, October 6, 2010

NJRMA v. New Jersey - Overview of the New Jersey Gift Card Litigation

As promised, we now have some additional information relating to the NJ Retail Merchants Association's lawsuit against New Jersey in response to that state's new unclaimed property laws relating to gift cards.  As we covered earlier, the new legislation (the "Bill") requires gift card issuers to obtain at least the zip code of all gift card purchasers (the "Zip Code Requirement") and requires that issuers turn over the full face value of cards inactive for 2 years (the "Face Value Requirement").  In addition, the legislation was expressly deemed to be retroactive - meaning that the new laws applied to cards that were issued years before the bill was enacted.

The full complaint, filed last Thursday, is worth a read for gift card issuers (or those otherwise interested), but a few of the allegations jump out. 

In challenging the Zip Code Requirement, the NJRMA notes that "[b]ecause Gift Cards are given away by the purchaser, there is no way for the issuer to know, or keep a record of, who the bearer, or rightful owner of a Gift Card is."  (Compl. at 15 - footnote omitted).  In other words, the NJRMA is challenging the utility of requiring issuers to obtain the zip code of a purchaser (as a purported proxy for the owners last known address), where experience shows that the owner and the purchaser of a gift cards are not necessarily (or even usually) the same.

In setting up their challenge to the Face Value Requirement, the NJRMA notes that their members' gift cards "generally do not expire and there is no fee associated with purchasing a gift card."  (Compl. at 19).  Accordingly, the NJRMA alleges, most retailers do not recognize any profit until the time that the gift card is actually used, but that it has a property right to the profit it would eventually receive if the gift card is used.

Taking a page from the Hollenbach litigation (in which American Express successfully challenged Kentucky's shorening of the dormancy period for travelers' checks), the NJRMA also alleges that, despite the stated purposes of the legislation (to protect the funds of gift card owners) ,"there was a clear revenue objective" to the legislation.  (Compl. at 36).  Specifically, the NJRMA noted a report by the Office of Legislative Services stating that the "fiscal impact" of  the legislation to be nearly $80 million in FY 2011.  In Hollenbach, a federal court ruled that "[s]hortening the presumptive abandonment period [for traveler's checks] . . . is not rationally related to raising revenue for the state, even if revenue raising were a legitimate state purpose or objective." 

As to the specific claims, NJRMA alleges that the Zip Code Requirement is preempted by the Supreme Court's decision in Texas v. New Jersey, in which the Supreme Court held that unclaimed property owed to owners with unknown addresses are escheatable to the holder's state of incorporation.

The second count of NJRMA's complaint alleges that the Bill violates the "due process" rights of the gift card issuer.  In particular, NJRMA alleges that although the gift card issuer makes no profit at the time of sale, it nonetheless "receive[s] a vested interest in the money tendered by the purchaser" at that time, and the State's taking of that property violates those property rights. 

The third count of the complaint alleges that the Bill violates the Contract Clause of the federal and New Jersey constitutions because of its retroactive application to gift cards sold prior to enactment of the Bill.

The final count of the complaint alleges that the Bill violates the Constitution's takings clause by requiring retailers to turn over the full dollar value of an unused gift card without accounting for the lost profits of the retailer. 

In light of these arguments, the Complaint asks the court to deem the Zip Code Requirement, the Face Value Requirement, and the Bill's retroactivity as "void, unconstitutional and unenforceable as a matter of law."

Tomorrow, we will review the allegations of the American Express lawsuit against New Jersey regarding the changes to the travelers' check dormancy period.

Tuesday, October 5, 2010

Breaking News: New Jersey Sued Over Unclaimed Property Legislation

According to the Bergen Record, American Express and the New Jersey Retail Merchants Association have separately filed lawsuits against the State of New Jersey seeking to invalidate parts of New Jersey's recently enacted changes to the state unclaimed property act.  As Escheatable covered earlier, New Jersey's unclaimed property changes reduced the dormancy period for traveler's checks from 15 years to 3 years and applied the terms of the unclaimed property act to gift cards for the first time (applying a 2 year dormancy period).


According to the Record, the Amex lawsuit challenges the reduction of the dormancy period for traveler's checks, while the NJ Retailers' Association lawsuit seeks to invalidate the law's requirement that gift card purchasers obtain the owners' name and address.  Both lawsuits challenge the New Jersey law on the grounds that the new law allegedly violates the Constitution's "due process" clause.  We will post additional information concerning the lawsuit after we review a copy of the complaint. 

Monday, October 4, 2010

Pennsylvania Unclaimed Property Webinar on Thursday

As part of its holder education efforts, the Pennsylvania Bureau of Unclaimed Property is hosting a one-hour webinar this Thursday, October 7th at 2:00 pm.  The event, hosted by the Philadelphia Legal Intelligencer, is titled "Unclaimed Property Compliance: Managing Your Risk & Responsibility", and is recommended for attorney, accountants, CFOs, holders compliance professionals, and, of course, those responsible for unclaimed property reporting.

Also, as a reminder, Pennsylvania is offering an amnesty program until October 31 for holders that missed the April 15 reporting deadline, or those who have never reported unclaimed property at all.  Additional information can be found at the website of the Pennsylvania Treasury Bureau of Unclaimed Property.

Friday, October 1, 2010

Did You Know? - No Abandoned Milk Money

It's time again for Did You Know?  On Fridays here at Escheatable, we provide you with interesting information regarding the unclaimed property laws to amaze your friends and frighten your enemies.  Today's entry is from New York:

You say you'd like to buy milk?  Can I see your license?

The New York Abandoned Property Law does not apply to abandoned interests in the Milk Producers Security Program, which protects milk sellers from defaults by "licensed" "milk dealers."  Presumably, amounts received from unlicensed street milk dealers are subject to the APL.

Source:  N.Y. Agriculture & Markets Law, Sec. 258-b.

Thursday, September 30, 2010

States Make Creative Attempts to Return Unclaimed Property

We've been spending a lot of time here recently documenting efforts by states to use unclaimed property as revenue.  It's only fair to spend some time talking about the creative methods some states using to try return unclaimed property to its rightful owners.  In some states, efforts to reunite unclaimed property owners with their funds begin and end with the maintenance of an unclaimed property database, and an annual publication of owner's of unclaimed property buried in one or two issues of a county newspaper.  In other states, however, the unclaimed property offices go above and beyond the publication requirements imposed by the Uniform Unclaimed Property Act.

In Oklahoma, for example, the state unclaimed property department paid out nearly $400,000 in unclaimed property to more than 500 people through a booth at the State Fair.  Thus, in addition to being able to see the "Dairy Showmanship" competition, the "Okie Karaoke" competition, and a performance of Disney on Ice (TM), some lucky Sooners were able to come away with cash.

In Kentucky, perhaps inspired by the recently passed Talk Like A Pirate Day, the State Treasurer is hosting "Treasure Finder's Day" at the Fleming County Library on October 6th.

So, whether its at the State Fair or the local library, some states are making an effort to repay unclaimed property.  If anyone is aware of other unique methods being used, drop us a line here.

Wednesday, September 29, 2010

Using Unclaimed Property to Balance the Budget

The Detroit News has a very interesting editorial which is quite critical of Michigan's proposal to shorten unclaimed property dormancy periods to balance the budget.  As we've discussed, states holding unclaimed property generally only keep a small amount in trust to pay owner claims, and use the rest as general revenue.  Accordingly, states faced with budget deficits - such as Michigan - are tempted to tighten unclaimed property laws in order to increase the amount of money brought in. 

As the editorial points out, however, this is really only a temporary measure.  Unclaimed property brought in earlier is unclaimed property not brought in later.  According to the Michigan House Fiscal Agency, although the shortening of dormancy to 3 years (from 5) will increase the amount of money brought in over the next two years, it will decrease that amount for the following three years.  Moreover, this money does not belong to the state, but is rather money that it is holding in custody for the rightful owner, and is subject to claim by that owner at any time. 

Thus, while unclaimed property can be used in a pinch to cover state budget gaps, it is not a long term solution.

Tuesday, September 28, 2010

Auctioning Unclaimed Property in Missouri

State unclaimed property laws generally apply to most "intangible" items held or issued by banks and financial institutions.  This includes dormant checking and savings accounts, uncashed cashier's checks, and unclaimed CDs (this kind, not these).  But what happens to abandoned safe deposit  boxes?  State unclaimed property laws apply to those as well.  Section 3 of the 1995 Uniform Unclaimed Property Act, which has been enacted in several states, provides that:  "Tangible property held in a safe deposit box or other safekeeping depository in this State in the ordinary course of the holder’s business . . . are presumed abandoned if the property remains unclaimed by the owner for more than five years after expiration of the lease or rental period on the box or other depository."

Thus, thousands of birth certificates, deeds, collectibles, and other items are escheated to the states every year.  The states, in turn, do not maintain an end-of-Raiders-of-the-Lost-Ark-style warehouse to keep all of these items.  Generally, the items with some value are auctioned off to the public, and those with no commercial value are destroyed.  For example, last week the State of Missouri held an unclaimed property auction, which raised more than $100,000 for owners.  Among the items that sold were an autographed Pete Rose baseball, a metal toothpick, a November 1985 issue Sports Illustrated (presumably this one), and a fanny pack (which sold for $1).

Monday, September 27, 2010

NJ Unclaimed Property Changes -- The Saga Continues

New Jersey's attempts to apply the state unclaimed property laws to stored value cards (gift cards) and similar instruments has not gone smoothly.  The process (and governing requirements) seem to change on a weekly basis, and continue to evolve. 


The Treasury Department recently released another announcement providing guidance on implementation of the stored value card law.  First, the Treausry has decided to exempt "prepaid phone cards" from the requirements of the unclaimed property act.  As we mentioned earlier, a bill was already pending before the legislature to institute such an exemption.  Most notably, the Treasurer has decided to eliminate the requirement that stored value card issuers collect name and address information from the purchaser.  Instead, the Treasury has determined that obtaining the zip code of the purchaser is sufficient.  The announcement also provides that, effective November 1, 2010, the following guidelines will be in place:
  • Prepaid phone cards redeemable in minutes will be exempt from the Act, but cards issued by telephone companies redeemable in cash or for prepaid services will not be exempt;
  • Holders that obtain name and address information for stored value card purchasers in the normal course of business will be required to continue to obtain that information;
  • Holders that require a stored value card recipient to "register" the card will be required to obtain name and address information during the registration process, and will be required to retain that information;
  • For holders who do not obtain such information, they will be required to obtain the zip code of the purchaser;
Separately, a new bill has been introduced in the New Jersey State Assembly that would effectively undo all of the recent changes to the state Unclaimed Property Act.  Assembly Bill 3250 would remove all references in the Act to "stored value cards," increase the dormancy period for traveler's checks back to 15 years, and increase the money order dormancy period back to 7 years.  The bill is currently pending before the Assembly Appropriations Committee.  Of course, unless and until the bill passes, the current unclaimed property laws will remain in effect.


Friday, September 24, 2010

Did You Know?

It's time again for Did You Know?  On Fridays here at Escheatable, we provide you with interesting information regarding the unclaimed property laws to amaze your friends and frighten your enemies.  Today's entry is from Michigan:

Getting Unclaimed Property From Them Was Like Pulling Teeth

According to the Michigan Holder Reporting Guide, the state Unclaimed Property Division will not accept dentures "unless they contain gold fillings."  Diamond grills appear not to be included.

Thursday, September 23, 2010

UPPO Comments on Proposed Michigan Legislation

As we've covered, Michigan is attempting to close part of its budget gap by radically changing the state unclaimed property act.  Under the proposed legislation, most dormancy periods would shorten to 3 years, and the state would require reporting and remittance to take place for 3 different periods over the next 3 years. 

Yesterday, the Unclaimed Property Professionals Organization issued letters  to the Chairmen of the Appropriation Committee setting forth several well thought-out concerns regarding the legislation (aside from the shortening of the dormancy periods).  For those who might be unfamiliar with UPPO, it is a not-for-profit advocacy association that provides education, networking, and advocacy for the holders of unclaimed property (disclosure:  I am a member of UPPO). 

While the UPPO's concerns are worth reviewing in full, the feature of the new law that sticks out the most is its use of several different reporting periods.  Presumably because funds are needed on a rolling basis to balance the state budget, the Michigan legislation has three different reporting periods.  First, the "usual" November 1, 2010 deadline will remain in place.  Next, there will be a second report due July 1, 2011 for property deemed unclaimed for the 9 month period of July 1, 2010 to March 30, 2011.  Thereafter, reports will be due July 1 for property deemed abandoned as of the preceding March 30.  These reporting and cutoff dates are not used by any other state.

What is striking about these different dates is that there would seem to be no rational reason for them except, as noted, to keep unclaimed funds coming into state coffers on a regular basis.  While it has always been understood that unclaimed funds in the possession of the state would be used for other purposes, this is perhaps the most explicit example of the unclaimed property laws being overtly used to generate state revenue.



 

Wednesday, September 22, 2010

A Look at the Other Side: Unclaimed Property "Finders"

We spend a lot of time here at Escheatable talking about the rights, obligations, and practices of unclaimed property holders.  Today, we look at the other side - unclaimed property finder firms.  Generally, these firms will locate unclaimed property (from state unclaimed property databases, court records, and/or using information provided by a holder), find and contact the apparent owner, and offer to handle the reclaim process -- usually in exchange for a significant percentage of the claimed funds. 

These finder firms are subject to widely differing regulation from state to state.  In some states, such as Oregon, finders must be licensed by the state.  In other states, there is no licensing process, but the state unclaimed property act limits the fees that can be charged.  In North Carolina, for example, the Attorney General's office recently announced that it took action against a finder firm for charging finder's fees in excess of the twenty percent permitted by law.

A recent case from New Jersey involving a finder firm demonstrates that finder contracts will be thoroughly scrutinized by the courts.  Haven Savings Bank v. Zanolini involved two separate contracts (the Anderson Contract and the Zanolini Contract) pursuant to which a finder firm -- Global Discoveries, Ltd. -- agreed to assist with the reclaim of surplus funds generated by a sheriff's sale.  In both cases, Global contracted for a 35% share of the claimed property, the maximum amount permitted by law (see N.J.S.A. 46:30B-106).  After the lower court refused to enforce either contract as written, the Appellate Division allowed Global to collect its 35% contingency fee with respect to the Anderson Contract, but not pursuant to the Zanolini Contract.  In so doing, the court made clear that although it would allow the 35% fee, it would insist that such a finder contract comply with all legal requirements. 

Pursuant to N.J.S.A. 46:30B-106, a finder may charge a fee of 35% if (a) the property is not yet dormant; (b) there is a signed agreement between the finder and the owner; (c) the agreement sets forth the "nature and value" of the property; and (d) the agreement sets forth the value of the "owner's share" after the property is recovered.  Both the Anderson and Zanolini Contracts met the first three requirements, but the Zanolini Contract did not set forth the value of the "owner's share."  The fact that the "owner's share" of the property could have been determined from the contract and a calculator was of no moment to the Appellate Division.  Instead, the Appellate Division determined that Global's failure to include that information in the agreement itself  "leads inexorably to the conclusion that the Zanolini contract is simply not valid under the plain terms of the statute."   

Accordingly, although some state unclaimed property laws allow finders to charge substantial fees, the Haven case is a reminder that the courts will insist upon total compliance with the letter of the law.

Tuesday, September 21, 2010

NJ Publishes Gift Card Reporting Guidelines

Pursuant to new legislation enacted earlier this summer (see prior coverage here and here), holders will have to begin reporting stored value cards, such as gift cards, to the State of New Jersey as unclaimed property.  In order to facilitate holders' first-time reporting of this property, the New Jersey Department of Treasury has recently published guidelines for the reporting of stored value cards.

Under New Jersey law, unclaimed property reports are due on or before November 1.  The guidelines issued by the Treasury Department suggest (but do not require) that holders file two separate reports:  one for stored-value cards, and one for all other property.  Among other provisions, the guidelines also provide that:
  • Holders should not report gift cards in the aggregate (regardless of dollar amount).
  • "Pay cards" - stored value cards issued in place of wages - have a 1 year dormancy period.
  • there is a 5 year reach back period for stored value cards - all items with issue dates of July 1, 2003 are subject to the Act.  There is no reach-back period for pay cards - all items are subject to the Act.
  • Property type MS12 should be used for most stored value cards, property type MS01 for pay cards.
  • Ifthere is no owner address information, the holder should list the zip code of where the card was sold.

Monday, September 20, 2010

New Jersey: More Pending Stored Value Card Activity

As we reported earlier, New Jersey enacted extensive new legislation regarding stored value cards.  Under the new law, gift card issuers are required to report and remit balances for cards belonging to New Jersey residents that have been inactive for more than 2 years.  In addition, the new law also requires gift card issuers to obtain the name and address of the card purchaser or owner (though that requirement is currently suspended until at least October 1).

Early last week, a new bill was introduced that would exempt cards "redeemable for long-distance telephone service," "wireless telephone service," and similar cards.  The bill is currently pending before state Assembly.

Friday, September 17, 2010

Did You Know? Friday

It's time again for Did You Know?  On Fridays here at Escheatable, we provide you with interesting information regarding the unclaimed property laws to amaze your friends and frighten your enemies.  Today from Oregon:


They broke the mold.  No, seriously.  They were legally required to break the thing.


Under Oregon law, if a customer does not claim or use a mold after 3 years, "the molder shall render the mold unusable as a mold . . . ."

Source:  Or. Rev. Stat. 98.485.

As always, if you have a suggestion for a Did You Know? entry, or any other unclaimed property information you would like to see, drop us a line here.

Enjoy the weekend! 

Thursday, September 16, 2010

Finding the Owners of Unclaimed Property -- Here's a Hint: Look to the Left of Nevada

We've run a few articles demonstrating that the owners of unclaimed property are often not unknown individuals with no heirs or companies long out of business.  Oftentimes, the owners of unclaimed property can be found in some pretty public places: at the Oscars,  patrolling the sidelines for the New England Patriots, or at the top of the American League East.

But this one takes the cake.  As reported by Fox 40 News in Sacramento, California the State of California is holding funds in the unclaimed property trust fund for -- wait for it -- the State of California.  On the one hand, this is pretty good news for the state.  After all, California is currently facing a $19 billion (yes, with a "b") budget deficit.  It does, however, raise some issues.  First, and most obvious, California's efforts to reunite holders with their money (which have already been the subject of one federal court injunction) can't be particularly effective if the State can't inform itself of its own funds.  Second, the property being reported is money that individuals and companies have tried to pay the State, and the State has failed or refused to accept the money (e.g., by failing to cash a check), so there is a larger bookkeeping issue somewhere.  Finally, precisely why is anyone having difficultly locating the owner?  Try looking here.

Wednesday, September 15, 2010

California Preemption Decison with Unclaimed Property Implications

A recent opinion of the California Court of Appeal relating to the preemption of a California consumer protection statute has implications for state unclaimed property laws.  In Tanen v. Southwest Airlines, the court ruled that state-law claims relating to the redemption of Southwest "travel certificates" were preempted by the federal Airline Deregulation Act ("ADA").  Although the Tanen case did not specifically deal with the California Unclaimed Property Act, the court's preemption rationale is likewise applicable to the unclaimed property laws of those states who seek to take possession of unused airline tickets.  A brief summary of Tanen is as follows:

According to the complaint, Tanen purchased a $100 travel certificate from Southwest in February of 2005.  Southwest's travel certificates are redeemable toward the purchase of an airline ticket, food and drinks on flights, and Southwest vacation packages.  The travel certificate order form indicated that "[a]ll gift certificates expire one year from the date of issue and will not be extended unless prohibited by law."  Tanen's travel certificate expired in February of 2006, and he brought suit against Southwest in May of 2006.  Tanen alleged, among other things, that the one year expiration date violated Section 1749.5 of the California Civil Code, which generally prohibits the imposition of expiration dates on gift certificates and related items.

In opposition to the suit, Southwest argued that Tanen's claims were preempted by the Airline Deregulation Act, which preempts state laws relating to the "price[s], route[s] or service[s] of an air carrier."  The lower court ruled that because the travel certificates could be redeemed for tickets, the were "at the heart of what the ADA sought to preempt," and dismissed the complaint.  On appeal, the Second District Court of Appeal affirmed.  The court concluded that Section 1749.5 related to airline "services," and was thus preempted, because enforcement of the prohibition against expiration dates would have the effect of requiring airlines "to offer travel certificates that are redeemable at any time, rather than permit them to offer travel certificates with varying expiration dates."  The court also noted that its decision was consistent with other cases in which courts concluded that state consumer protection laws could not prevent airlines from offering nonrefundable tickets.  Accordingly, the court affirmed the dismissal of the complaint, and awarded Southwest appeal costs.

Though the Tanen case did not address California's unclaimed property laws, the court's logic is no less applicable to state attempts to bring unused airline tickets within the scope of their unclaimed property laws.  Although unused airline tickets are expressly exempt in some states (such as Alaska), there are numerous states whose unclaimed property acts expressly apply to such items (e.g., Mississippi, Oklahoma, Utah, Colorado, and Oregon).  Much the same as enforcement of the California consumer protection law was preempted because its enforcement would have the effect of requiring airlines to offer a product that they did not (non-expiring gift certificates), the application of state unclaimed property laws would likewise require airlines to offer airline tickets that are valid in perpetuity.  As a practical matter, I don't know if any airline actually escheats unused airline tickets, or whether the states with such laws seek to enforce the requirement.  If so, it will be interesting to see if airlines seek to use the Tanen decision to avoid escheating these items in the future.

Tuesday, September 14, 2010

The Screen Actors Guild & Unclaimed Royalties (a Sequel)

Hollywood loves sequels.

The Associated Press is reporting today that the Screen Actors Guild has settled a lawsuit with Ken Osmond (better known as Eddie Haskell from Leave it to Beaver) regarding foreign royalties relating to videos and cable reruns.  These moneys were collected by foreign "royalty societies" but never paid to, or claimed by, the owners/performers due the royalties.  Instead, these moneys were allegedly held by the Screen Actors Guild.

According to the The Hollywood Reporter, part of the problem was that "some shows, especially older programs, make it difficult to determine the payments based on compensation. The typical payments will be less than $50, with a minimum requirement of $10 to trigger the cutting of a check."  In other words, this was the typical high volume, low dollar amount property that generally winds up in the hands of the state as unclaimed property.  According to the SAG's General Counsel the royalties represented "money that would otherwise have gone unclaimed and been lost to [the actors] forever . . . ."  Certainly that is disputable as a matter of unclaimed property law, but it's good that the performers will get the money to which they are entitled.

Notably, this is not the Screen Actors Guild's first time at the unclaimed property rodeo.  One of the most well-known cases in unclaimed property law is Screen Actors Guild v. Cory, a 1979 California case that is one of seminal judicial opinions on "private escheat."  Generally, the prohibition against private escheat is an unclaimed property law doctrine that a holder cannot enforce contractual terms which have the effect of transferring ownership of unclaimed property from the owner to the holder.  While this is a judicially recognized doctrine in some states, in others it is codified in the law.  For example, under Delaware law "[a]ny provision in a certificate of incorporation, by law, trust agreement, contract or any other writing . . . relating to property . . . which provides that upon the owner's failure to act or make a claim regarding property . . . that such property reverts to or becomes the property of the holder, in contravention of this chapter, shall be void and unenforceable."

In Screen Actors Guild v. Cory, the SAG claimed that certain undistributed royalties were not escheatable to California because of a SAG membership bylaw "if after six years a member does not claim his residual funds, they are automatically assigned to plaintiff for the use of its membership."  The California court determined that the bylaw was contrary to public policy, reasoning that it was "void as a private escheat law obviously designed to frustrate operation of the UPL."  While the Court's opinion is worth reviewing, its logic is succintly summarized in its last sentence:"In short, a private escheat law cannot circumvent the effect of a public one." 

Let's hope that there is not a third installment of this story.

Monday, September 13, 2010

Interesting Two Part Series on Canadian Unclaimed Property

Over this past weekend, the Edmonton Journal ran an interesting two-part series on Canadian unclaimed property. Though the articles were similar to countless articles run in local papers throughout the U.S., they underscored two issues that have been discussed recently on this blog.  First, that many owners of unclaimed funds are not deceased, lost, or untraceable in any way, they simply have not claimed their funds.  Second, many of the entities having unclaimed funds can certainly use the extra money. 

The first article gives an overview of the Canadian unclaimed property law landscape and mentions, as have others, that there are often unclaimed funds belonging to well-known (and easily found) owners.  Not only are there the countless small-dollar (or, in this case, small Loonie) items that owners don't claim, but there are also those, like the Canadian university discussed in the story, that refuse to claim property because of a good faith belief that the funds are not owed.  In many industries where there are a high volume of transactions between parties, such as the securities industry, calculation differences or balancing discrepancies are commonplace, and a frequent cause of unclaimed property.  When counterparties A and B cannot agree which of A or B are owed funds (especially when the amount at issue is small) the result is often that the broker holding the credit will escheat the funds as unclaimed property.  Though there is an objectively "correct" answer as to whether the funds are due to A or B, the funds instead wind up with neither A nor B; rather, the money winds up with the State.

The second article told the story of Rochelle Treister, who has been responsible for tens of thousands of dollars being sent to charities.  Is she a donor?  Not exactly.  Is she a fundraiser?  Kind of.  But she did not obtain this money by cold-calling donors or sending out unsolicited mailings.  Rather, Ms. Treister searched unclaimed property lists and similar databases for money being held in the name of various charities.  She made sure that charities received thousands of dollars by just ensuring they obtained funds that were already theirs.  That idea works in the United States as well.  For example, a search of the New York Office of Unclaimed Funds database discloses that the American Cancer Society, American Heart Association, and Komen Race for the Cure all have items being held by the OUF.  Ms. Treister's idea is simple, but powerful.  Perhaps there will soon be a way for it to be adopted on a wide-scale basis.