Join now!   |   Subscribe   |   Pay an Invoice   |   Sign In
Unclaimed Property Focus
Blog Home All Blogs
Search all posts for:   

 

View all (318) posts »
 

Litigation update: California judge rules that merchandise return certificates are considered gift certificates in Bed, Bath & Beyond case

Posted By Contribution from Sam Schaunaman, J.D. and GRAC member, Thursday, May 12, 2016

Bed, Bath & Beyond Inc., Plantiff v. John Chiang, California State Controller, Defendant (Superior Court of California, County of San Diego)

 

Background

Like many retailers, Bed Bath & Beyond Inc. (BB&B) issues merchandise return certificates (MRC) to customers that have no original receipt but would like to return merchandise. The MRC terms indicated they can only be used at BB&B or affiliates, are not redeemable for cash, do not expire, and in order to redeem the certificate, the MRC must be used to purchase merchandise at BB&B and present the MRC.

From 2004 to 2012, BB&B reported and remitted MRC property that had sat dormant for three years to California equal to the full unredeemed balances of the MRC issued to California customers. In total, $1,834,477.62 was remitted to California.

 

BB&B requested a refund from California claiming it mistakenly remitted MRC funds to California, and when California wouldn’t grant the refund request, BB&B filed suit against California and Controller John Chiang.

 

Ruling
On March 4, 2016 a Superior Court of California judge entered a favorable order to the plaintiff, finding that MRC are deemed a type of gift certificate under California unclaimed property law.  Highlights of the order handed down by the judge are as follows:

  • If property isn’t owing to owner it’s not escheatable: The defendant alleged that the property was properly escheated, and argued that MRC are a type of “intangible personal property” escheatable under California unclaimed property law. The court disagreed, stating that only intangible property that is actually “owing” to an owner is escheatable.  Further, the order stated that “The Court concludes that because the MRCs are not redeemable for cash, the Plaintiff does not owe money to the owner of an MRC.” 
  • MRC do qualify as a gift certificate: The court agreed with the plaintiffs that MRC qualify as gift certificates, and stated two specific reasons for qualification:
  • BB&B’s MRC had the same characteristics as a more traditional gift certificate or card that’s labeled “gift certificate” or “gift card”; and  
  • The order noted that the law recognizes gift certificates in circumstances other than purchases as a gift.  For example, the court stated that “gift certificates” under the law include those distributed by the issuer to a consumer pursuant to an awards, loyalty, or promotional program. 

 

Impact on unclaimed property compliance

Once the final judgment is entered, this will provide additional clarity to the property that is covered under California unclaimed property law. With the limited published legal opinions on this topic, it’s advised to consult each state’s law before altering compliance policies.  

 

Next steps
The judge has not entered a final judgment in the case, and once the final judgement is issued, the defendant has 60 days to file an appeal, if they so choose.

 

About the contributor

Sam Schaunaman, senior manager at Ryan AUP and member of the UPPO Government Relations and Advocacy Committee, contributes to UPPO’s monthly litigation update blog posts. Schaunaman has over 26 years of unclaimed property experience in all aspects of unclaimed property and is a frequent author of unclaimed property articles and whitepapers. Schaunaman is a member of the Oklahoma Bar Association and American Bar Association.    

 

 

Disclaimer: This case summary contains a general description of the case, and neither UPPO nor Ryan, or any of their affiliated or related entities, by means of this summary, is rendering 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:  bed bath and beyond  litigation  merchandise return certificates  unclaimed property 

Share |
Permalink | Comments (0)
 
Membership Software Powered by YourMembership  ::  Legal