Wednesday, February 26, 2014

Well, That's Different

In recent years, there have been a number of instances where states have proposed (and sometimes ultimately enacted) laws to change the "dormancy period" for various types of property.  For those still new to unclaimed property law, the dormancy period is the statutorily defined period of time before a "holder" (the entity in possession of the property) may hold it before it must be reported and delivered to the state.  For example, if a state prescribes a three year dormancy period for bank accounts, that generally means that if the account owner engages in no activity in the bank account (e.g., deposits, withdrawals) for three years, the bank must report and deliver the property to the state.

Because shortening the dormancy period has the effect of allowing the state to take custody of unclaimed property sooner, states have frequently resorted to shortening the dormancy periods for unclaimed property to generate more revenue.  For example, Michigan shortened the dormancy period for nearly all property types from 5 years to 3 years.  According to the Michigan House Fiscal Agency this change was projected to result in increased revenue to the state in excess of $200 million.

Against this backdrop, it is little surprise to see that there is a bill pending in the Illinois General Assembly that, if enacted, would change the dormancy period for most property types.  But, there's a twist - House Bill 5823 would actually lengthen the dormancy period for most property types under Illinois law, from 5 years to 8 years.  There is no accompanying legislative report or recommendation (as yet) explaining the rationale for the proposal, but the longer dormancy period would conceivably cut down on the amount of non-unclaimed property that gets swept up into state coffers.

Sunday, February 2, 2014

Delaware VDA Lawsuit Settled - Everything Stays the Same

In April of this year, we noted a lawsuit filed against Delaware's unclaimed property authorities arising out of a Voluntary Disclosure Agreement with Select Medical that became adversarial.  The lawsuit, which was being watched closely by unclaimed property professionals, challenged, among other things:
  • Delaware's use of estimation prior to the enactment of the statute authorizing estimation;
  • Delaware's alleged use of "arbitrary and capricious" estimation methods;
  • the inclusion of non-dormant property in Delaware's estimation procedures; and
  • Delaware's claimed disregard of the Texas v. New Jersey priority rules.
According to The Washington Post, the state and Select settled the case and dismissed all claims against one another.  No further information on the settlement is publicly available.  While this is probably a good outcome for the parties involved, it also demonstrates why there is relatively scant caselaw in the field of unclaimed property:  the vast majority of disagreements between states and holders are settled without litigation (or, at least, settled before any case is litigated to a conclusion).  So, despite six months or so of litigation, and doubtlessly thousands in legal fees, the questions and issues listed above remain unresolved.