Thursday, March 10, 2011

Breaking News: Costco Sues Washington State Over Unclaimed Rebates

According to an article by Vanessa Ho in Tuesday's Seattle Post-Intelligencer, Costco - the famous big box grocer/wholesaler - has just sued the State of Washington over $3 million in unclaimed rebates.  According to the article, Costco alleges that it should not have to turn over the amounts requested by the state because it has engaged 3rd party rebate fulfillment houses to manage its rebate programs and that it does not retain the amounts at issue.

As those in the unclaimed property field know, this is far from the first lawsuit between holders and states regarding unclaimed rebates.  In 2006, some thirty-six states, led by Iowa, sued Young America Corporation - a rebate fulfillment house - over the failure to turn unclaimed property over to the states.  That lawsuit eventually resulted in a number of settlements between the states and Young America's customers.  We will continue to follow the developments in Washington.


  1. The state probably should have tried to get the money from the third-party rebate company instead. Delaware v. New York established that an intermediary can be a holder of unclaimed property, so the holder in this case seems to be the third-party company. But if Costco is still the obligor, it may be a different story. Who is the obligor in this situation?

  2. I've seen this situation before where the state pursues the rebate issuer because the third-party rebate fulfillment company has since gone bankrupt. I haven't yet seen the complaint to find out if that is the case here, or if there is some other reason. I also don't know what the terms of the rebates at issue were. For example, is this a situation where the rebate recipient filled out and sent in a form, and just didn't cash the resulting check? Or is it a situation where the state is seeking an account balance set aside to pay for redeemed rebates in the future?

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