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Litigation Update: New Jersey Court Issues Merchandise Certificate Decision

Posted By Administration, Thursday, November 16, 2017

BBB Value Services Inc. v. Treasurer, State of New Jersey, Department of the Treasury et al. and Bed Bath & Beyond Inc. v. Treasurer, State of New Jersey, Department of the Treasury et al.

 

On Sept. 21, 2017, the New Jersey Superior Court Appellate Division issued an important decision regarding merchandise certificates. The plaintiffs in the original cases under appeal were Bed Bath and Beyond and its subsidiary, BBB Value Services Inc. The respondents were unclaimed property officials with the state of New Jersey. Both plaintiff companies had filed for refunds with New Jersey for escheated amounts attributable to merchandise certificates and were denied.

 

The merchandise certificates in question resulted from a Bed Bath and Beyond policy that customers who returned merchandise without a receipt would be given a certificate for merchandise or services, but not cash. From 2004 to 2012, Bed Bath and Beyond reported and remitted these certificates to New Jersey’s unclaimed property administration. In 2014, the subsidiary reported a sum attributable to certificates issued between 2010 and 2011. When denying the refund claims from both entities, the state argued that the merchandise certificates were considered credit memoranda.

 

The court reversed the state’s denial of both entities. Bed Bath and Beyond successfully argued that the merchandise certificates weren’t covered under New Jersey’s unclaimed property act, in part because they weren’t redeemable for cash. The court agreed that they didn’t fit the definition of “property,” ruled in favor of Bed Bath and Beyond and said the company was entitled to a refund.

 

The subsidiary, BBB Value Services, argued that the items in questions were stored-value cards and not credit memoranda under a July 2010 amendment to New Jersey’s unclaimed property act. As such, they weren’t presumed abandoned until after five years of inactivity and, even then, they should have been reportable at only 60 percent.

 

The subsidiary said that if the certificates were indeed considered stored value cards, the five-year dormancy period had not run. If they were not considered stored value cards, then they wouldn’t be subject to New Jersey’s unclaimed property act because they weren’t redeemable for money. The court agreed with BBB Value Services that the certificates were stored value cards.

 

The court ruled the state had erred by not giving BBB Value Services a refund. Thus, the subsidiary was entitled to a refund, but because the five-year dormancy period had now run, some of the property must now be reported. So, BBB Value Services was directed to file a new report.

 

 

Special thanks to Sam Schaunaman, recently retired senior manager at Ryan AUP and longtime member of the UPPO Government Relations and Advocacy Committee, for his frequent contributions to UPPO’s litigation update blog posts.

 

Disclaimer: This case summary contains a general description of the case. It is not intended as business, financial, legal, tax, reporting or compliance or other professional advice or services. This summary blog is not a substitute for such professional advice.

 

Tags:  litigation  merchandise certificates  New Jersey 

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