Tuesday, June 12, 2012

Michigan "B2B" Exemption Passes

More than a year ago we mentioned that Michigan was considering House Bill 4563, which would add a business-to-business exemption to the Michigan Unclaimed Property Act.  That legislation was finally enacted (effective immediately) about two weeks ago.  The text of the legislation provides, in relevant part, that:
Except with respect to property described in sections 7 and 17, this act does not apply to any credit balances, overpayments, deposits, refunds, discounts, rebates, credit memos, or unidentified remittances created on or after April 1, 2009 and issued, held, due, or owing in any transactions between 2 or more associations. This exemption does not apply to outstanding checks, drafts, or other similar instruments.
 The references to "sections 7 and 17" refers to those sections of the Michigan Unclaimed Property Act relating to bank deposits and safe deposit box items, respectively.  While the legislation is effective immediately, by its terms, the exemption only applies to items "created on or after April 1, 2009."  In other words, property that is reportable starting with next year's report.


  1. Mike,
    Since you're an attorney, I wanted to share this article with you and get your thoughts on it.
    It's about Cy pres and unclaimed funds from class action lawsuits going to charities as designated by the courts.
    Is class action money not escheatable?

    1. Mary,

      Thanks for passing this along. As with so much else, the ability of a court to order distribution of unclaimed class action proceeds is an open (and disputed) question.

      As a general matter, it would seem clear that, in most states, funds left over from a class action settlement would be subject to the unclaimed property laws. In some instances, however, a class action settlement agreement will contain a provision that expressly dictates what happens to any unclaimed funds. While the states would probably disagree, there are good reasons that justify allowing the parties to decide in advance what happens to those funds.

      The question raised by this article is what to do when there are unclaimed settlement proceeds and the agreement does not specify what to do with them. Perhaps unsurprisingly, the cases on this go both ways. In some instances, courts have found that the ability to dispose of unclaimed class action proceeds falls within the court's powers to dispose of an action. More recently, there have been decisions suggesting that the courts have no such power.

      Absent one of these cases being appealed to the Supreme Court (which is unlikely), we may not have a definitive answer for some time.

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