Join now!   |   Subscribe   |   Your Cart   |   Sign In
Unclaimed Property Focus
Blog Home All Blogs
UNCLAIMED PROPERTY FOCUS is a blog written by and for UPPO members, featuring diverse perspectives and insights from unclaimed property practitioners across the U.S. and Canada. We welcome your submissions to Unclaimed Property Focus. Please contact Tim Dressen via tim@uppo.org with any questions about submitting a blog post for consideration and refer to our editorial guidelines when writing your blog post. Disclaimer: Information and/or comments to this blog is not intended as a substitute for legal advice on compliance or reporting requirements.

 

Search all posts for:   

 

Top tags: unclaimed property  Compliance  education  UPPO  audits  Delaware  due diligence  litigation  Advocacy  reform  Members  ULC  fall reporting  legislation  RUUPA  UPPO annual conference  Gift Cards  reporting  UP101  UP Laws  Uniform Law Commission  california  Holders Seminar  UPPO Asks  VDAs  Canada  securities  service providers  Pennsylvania  uniform unclaimed property act 

Appeals Court Sides with Federal Government Over States in Unclaimed Savings Bond Battle

Posted By Administration, Thursday, August 15, 2019

On Aug. 13, 2019, the U.S. Court of Appeals for the Federal Circuit ruled in favor of the U.S. Treasury in a dispute with Kansas and Arkansas over the handling of unclaimed savings bonds. 

 

The states sought to enforce escheat laws specifying that, if bond owners fail to redeem their savings bonds within five years after maturity, the bonds would be considered abandoned and would transfer to the states two or three years later. When the U.S. Treasury refused the states’ efforts to claim such bonds, the states filed suit. A U.S. Claims Court sided with Kansas and Arkansas, and the federal government appealed.

 

In its reversal, the Appeals Court provided two reasons for ruling in favor of the U.S. Treasury:

  1. Federal law preempts state escheat laws, meaning the bonds belong to the original bond owners rather than the states.
  2. Even if the states owned the bonds, they were not entitled to rights greater than the original bond owners, who must provide the serial number to redeem bonds six years or more past maturity. Because the states don’t have the physical bonds or serial numbers, the Treasury acted properly when denying their redemption request.

Despite the loss, states continue to pursue the estimated $25 billion in unclaimed savings bond funds. On Aug. 1, 2019, Sen. John N. Kennedy (R-Louisiana) introduced S. 2417, the Unclaimed Savings Bond Act of 2019. If passed and signed into law, the bill would give states access to information about unclaimed savings bonds for inclusion in unclaimed property databases and, ultimately, the ability to claim and redeem the bonds. 

 

Before serving in the U.S. Senate, Kennedy was state treasurer in Louisiana. His bill currently has two cosponsors, Sen. Jerry Moran (R-Kansas) and Sen. Bill Cassidy (R-Louisiana). S. 2417 has been assigned to the Senate Finance Committee, where it awaits further action.

Tags:  Arkansas  Kansas  legislation  litigation  savings bonds  U.S. Treasury  unclaimed property 

Share |
PermalinkComments (0)
 

Insights from the NAST Symposium, Part 2

Posted By Contribution by Christa DeOliveira and Michael Unger, Thursday, July 11, 2019
Updated: Thursday, July 11, 2019

The National Association of State Treasurers’ (NAST) Annual Treasury Management Training Symposium held during May 2019 in Providence, Rhode Island, was engaging and enlightening. The National Association of Unclaimed Property Administrators (NAUPA) is affiliated with NAST and led the well-attended unclaimed property track of educational workshops and sessions. This blog post is part two in a series about the topics discussed in the symposium sessions. Read part one here.

 

Legislation 

Discussion about RUUPA-inspired legislation characterized it as not following a one-size-fits-all approach. Some jurisdictions, including Colorado, the District of Columbia and Vermont, have repealed their unclaimed property statutes and enacted new versions of RUUPA that have been largely modeled after the Uniform Law Commission’s version. Others, including Maine, South Carolina and Washington, introduced amended versions of RUUPA.

 

Still other states, including Minnesota, maintained their existing statute with expansive modifications incorporating RUUPA-like designs. These bills keep significant portions of current law, including examination of records, release and holder indemnifications, associated periods of limitation, and owner claims. They also add many amended RUUPA provisions. 

 

Another approach is to limited the scope of changes by keeping existing law and incorporating RUUPA-inspired provisions. Nevada took this approach, as most of the current law remains intact, but it proposes several dormancy periods like RUUPA, allows for electronic owner outreach under specified conditions, and makes some adjustments to included property types.

 

Direct payments to owners were dubbed as the ultimate outreach. This is where the state issues a payment to the owner in the absence of a claim. Naturally, states conducting this type of direct payment have certain criteria, such as comparing the address on reported property to the address on tax records (or other state/government databases), and the dollar value of the payment. Colorado enacted this option as part of its RUUPA bill and Florida has pending legislation related to state and local governments on specified small-value claims. California, District of Columbia, Maine and Vermont were also cited for considering similar pending bills.

 

South Dakota enacted a reduction in aggregate reporting from $50 down to $10. There was pending legislation to eliminate aggregate reporting altogether in Connecticut, Nebraska and Nevada.

 

Time limits on claims was a hot topic again at this year’s symposium. Georgia has enacted narrow “pure” escheat legislation to terminate an owner’s right to claim property for unclaimed excess proceeds from the sale of abandoned vehicles. Hawaii had two such bills that failed. S.B. 978 would have property with a value of less than $250 escheat to the state, if not claimed within five years. H.B. 1130 would have had property less than $100 automatically escheat to the state upon being reported and remitted. In both Hawaii bills, the owners’ property rights would be fully terminated.

 

Notably, participants expressed concern about enacting time limits on claims. It was described as bad policy and in contrast to the purpose of unclaimed property laws existing to protect the property rights of owners. The shift from the state assuming title, rather than a custodial role, may cause due process violations and be constitutionally problematic, according to the discussion. It was also noted GASB accounting rules already have provisions for setting up reserves for the amount expected to be claimed and taking the rest into income. Again this year, NAUPA discussed drafting a resolution about preserving owner rights to claim unclaimed property from states in perpetuity.

 

It was reported that, at the time of the symposium, DMF matching requirements exist in 33 states, in some form. Colorado, Kansas and Wyoming added this requirement since last year’s symposium, and there was pending legislation in California, D.C. and Massachusetts.

 

Litigation

Litigation was also discussed. Several cases related to disputes in holders producing records were noted: Texas v. ClubCorp Holdings Inc.Commonwealth, Treasury Department. v. PPL Corporation.Delaware, Department of Finance v. Univar Inc., and Univar Inc. v. Geisenberger. Current active cases discussed were: Faasse v. Coinbase Inc. as a cryptocurrency case; Weinbach v. Boeing Company as a case asserting wrongful escheat; and United Insurance Company of America v. Patronis, appealing a prior insurance ruling in Florida. 

 

Cases related to the treatment of class action proceeds were cited: McLeod v. Bank of America, N.A. and Rodriguez v. Danell Custom Harvesting, LLC, and Tennille et al. v. The Western Union Co. et al. Two qui tam (whistleblower) cases were touched on: Total Asset Recovery Services, LLC v. MetLife Inc. and Delaware ex rel. French v. Overstock.com Inc.         

 

More expansively, Kolton v. Frerichs and Goldberg v. Frerichs deal with not paying interest on claims. In Goldberg v. Frerichs, loss of the time value of money on property can be compensated for by giving owners the benefit of interim earnings. In Goldberg, the court cited an example of a rare coin being reported and remitted as unclaimed property. If the coin is sold, the owner loses out on the opportunity of appreciation. As such, it is insufficient to compensate the owner simply with the sale proceeds when the owner claims his property. Instead, upon claiming, the owner would be entitled to the earnings on the invested proceeds as the best substitute for the loss of appreciation. In the Goldberg case, the court made the caveat that low value properties may be treated differently and are most unlikely to be entitled to earn interest where the administrative cost exceeds the interest. In April 2019, the plaintiffs’ in Goldbergsought to renew a class certification; therefore, this litigation is ongoing.

 

Based on this case the following questions were raised in the session: Will this lead to other litigation? Will this ruling be constrained to the 7th Circuit? Will states change their unclaimed property statutes to proactively address questions about interest? If states do decide to determine what will qualify as the threshold for accounts where the interest exceeds the administrative costs to preserve the account? If new statutes on interest are enacted what proxy will be used to determine the time value of money?

 

Time Bars

Currently there is not uniformity amongst state laws regarding the period of time after which a state cannot enforce its unclaimed property law. Such time bars can encompass periods of limitation, statutes of limitation, periods of repose or lapsed periods of enforcement. 

 

The different approaches include a set number of years; the number of years contingent on filing or notice; a hybrid of both; a limitation based on years to be examined under audit; some other form of limitation; or no time bar limitation at all. Also, states enacting RUUPA have followed different approaches, including following RUUPA language, maintaining provisions in current law or following other approaches.

 

The various versions of the Uniform Law Commission’s Uniform Unclaimed Property Acts contain different time bars, with the 2016 version listing five years from the date of a report and 10 years if no report was filed. In the presentation, it was noted this approach was not required and, instead, this was promulgated as an accommodation to holders.

 

The session equated time bars to an all-encompassing reporting exemption. It was noted that time bars regularly do not receive the deliberation they merit when drafting or considering new unclaimed property legislation. Further, the importance of weighing public and private interests when setting a time bar was raised.

 

While NAUPA succeeded on many controversial issues, it did not prevail on the matter of time bars, according to the discussion. NAUPA recommendations to the Uniform Law Commission were discussed as being 10 years, generally, but 15 years for either nonreporting or underreporting. The caveat to this was that if the holder’s books and records showed acknowledged liabilities that are presumed unclaimed, even if they were reportable prior to the time bar, it would not qualify. NAUPA communicated to the ULC it strongly opposed the ULC time bar provision.

 

Panelists discussed with certainty that shorter and more absolute time bars will result in less property being collected. The following recommendations were made related to enacting or revising legislation: do not include a time bar, but rather address look backs administratively; if a time bar is included, follow the 1995 Act provisions or what NAUPA proposed to the ULC; at minimum, follow the 1981 Act of 10 years plus the corresponding dormancy period; and consider the lessons of matured, unpaid life insurance.

 

The NAST Symposium unclaimed property track included important insights on legislation, suggestions on drafting legislation, court cases and time bars. While the topics covered may not directly or indirectly impact all property type holders, it is worthwhile to remain aware of NAUPA developments. It is also important to be informed of opportunities to work together with states, where our expertise and needs are aligned, and we can share our respective unique expertise and insights, and related unclaimed property challenges or issues.  

 

More information on this symposium will be available in future blog posts.

 

Christa DeOliveira is chief compliance officer with Linking Assets Inc. Michael Unger is a senior manager with Crowe LLP’s unclaimed property practice. 

 

Tags:  legislation  litigation  NAST  NAUPA  time bars  unclaimed property 

Share |
PermalinkComments (0)
 

Litigation Update: Delaware Supreme Court Rejects State’s Appeal

Posted By Administration, Thursday, June 20, 2019

On June 18, 2019, the state of Delaware took another hit in its battle with Univar. The latest rejection came from the Delaware Supreme Court, which denied acceptance of the state’s appeal of a May 2019 denial for interlocutory review by the state’s Chancery Court. 

 

In short, Delaware has been seeking enforcement of a subpoena for records requested by its unclaimed property auditor, Kelmar. The courts have consistently denied Delaware’s request, pending the outcome of litigation brought by Univar challenging the constitutionality of Delaware’s unclaimed property enforcement practices. 

 

“We agree that interlocutory review is not warranted in this case. The Court of Chancery exercised its discretion to stay litigation seeking enforcement of a subpoena issued under a statute that is the subject of federal constitutional challenges in federal court, and to avoid the potential for conflicting rulings and inefficiency,” the Delaware Supreme Court wrote in its decision to refuse Delaware’s appeal.

 

UPPO will continue to monitor and report on the Univar case as noteworthy developments occur.

Tags:  audits  Delaware  estimation  litigation  Univar 

Share |
PermalinkComments (0)
 

Litigation Update: Chancery Court Sides with Univar, Takes Issue with Delaware

Posted By Administration, Thursday, May 16, 2019

State of Delaware, Dept. of Finance v. Univar, Inc., C.A.

On Dec. 3, 2018, Univar Inc. filed a lawsuit against Delaware Department of Finance officials in a Delaware District Court, alleging that several aspects of an unclaimed property audit initiated by third-party auditor Kelmar in 2015 on Delaware’s behalf are unconstitutional.

According to Univar’s complaint, for more than two years Delaware rejected or ignored objections it had made to document requests from Kelmar. In December 2018, Delaware issued a subpoena for the records Kelmar had previously requested. Univar filed suit, raising constitutional issues regarding:

  • Delaware’s retroactive application of amendments to the Delaware Abandoned and Unclaimed Property Law.
  • The state’s estimation methodology.
  • The state’s use of a third-party auditor that simultaneously represents other states in a multi-state audit.
  • The state’s contingent-fee arrangement with its third-party auditor.
On Dec. 7, 2018, Delaware responded to Univar’s lawsuit by filing its own lawsuit in Delaware Chancery Court, seeking to force Univar to comply with its subpoena. Univar filed a motion asking the court to put Delaware’s lawsuit on hold until the constitutional issues at play in its original lawsuit were resolved.

Following a hearing on April 8, 2019, the Chancery Court judge granted Univar’s request. Delaware responded by requesting an interlocutory appeal – an accelerated appeal of the ruling, which can be granted in extraordinary circumstances. On May 6, 2019, Vice Chancellor Joseph R. Slights III denied the request and took exception with Delaware’s actions.

“The State continues to press its strategy of having two courts litigate the same constitutional challenges to the same Delaware statutes at the same time. The inefficiencies of this approach are apparently lost on the State. They are not lost on the Court,” Slights wrote in his decision.

UPPO will continue to monitor and report on the Univar case as noteworthy developments occur.

Tags:  audits  Delaware  estimation  litigation  Univar 

Share |
PermalinkComments (0)
 

Litigation Update: Univar Takes on Delaware

Posted By Administration, Thursday, January 24, 2019

Univar Inc. v. Geisenberger, et al.

 

On Dec. 3, 2018, Univar Inc. filed a lawsuit against Delaware Department of Finance officials, alleging that several aspects of an unclaimed property audit initiated by third-party auditor Kelmar in 2015 on Delaware’s behalf are unconstitutional. Among the issues at play in the Univar case are:

  • Delaware’s retroactive application of amendments to the Delaware Abandoned and Unclaimed Property Law (DUPL), amended on Feb. 2, 2017. 
  • The state’s estimation methodology.
  • The state’s use of a third-party auditor that simultaneously represents other states in a multi-state audit.
  • The state’s contingent-fee arrangement with its third-party auditor.

 

On Dec. 11, 2015, Delaware notified Univar it would be subject to an unclaimed property examination, conducted by Kelmar. Upon receiving document requests from Kelmar, Univar objected, citing confidentiality concerns, Kelmar’s self-interest, the estimation process and other aspects of the audit. According to Univar’s complaint, Delaware rejected or ignored the objections and continued to do so for more than two years. On Oct. 30, 2018, the state issued a subpoena for the records Kelmar had previously requested. 

 

The Univar case includes several issues that have been part of other recent cases, including Temple-Inland v. CookPlains All American v. Cook and Marathon Petroleum v. Cook. However, unlike those lawsuits, the Univarcase was filed after the February 2017 DUPL amendments and, thus, questions the state’s ability to retroactively apply those amendments to audits that were initiated earlier.  

 

“The subpoena power that Delaware is relying on to force production of records from Univar was not effective until February 2017,” said Jameel Turner, one of the attorneys with Bailey Cavalieri who is representing Univar in this case. “The February 2017 amendments also created a 10-year record retention requirement for unclaimed property records. Prior to that time there was no record retention requirement. Delaware is using estimation for holders that did not comply with a record retention requirement that did not exist until February of 2017. So, they are using estimation when holders do not have records for periods when the law did not require records to be kept. It simply does not make sense.”

 

Univar also picks up the challenge to Delaware’s estimation methodology where Temple-Inland left off. The Temple-Inland court ruled that the state’s estimation methodology was unconstitutional. Univar argues that Delaware merely added a 10-year look-back period but otherwise continues to rely on estimation practices already declared invalid.

 

Delaware and Kelmar also allegedly responded to Temple-Inland by rescinding its requests to holders for prior unclaimed property filings for all states because the court took issue with the practice. However, after the case was settled, these requests were reinstated and the state incorporated the right to request such prior filings into the 2017 DUPL amendments. 

 

“Delaware and Kelmar use prior unclaimed property filings for states not participating in the audit to increase the potential liability due and payable to Delaware,” Turner said. “Univar is asking a judge to confirm that the way they are using those prior filings is unconstitutional and that prior filings in nonparticipating states are not relevant to whether a holder has liability due and payable to any participating state.”

 

One of the issues in the Univar case that was also a factor in other recent litigation is the concept of ripeness. The Plains All American case also questioned Delaware’s use of estimation. The court said Plains may have valid complaints, but because the state had not yet formally taken steps to request records or force Plains to comply with the audit, the case was not yet ripe. 

 

“One of the reasons the Plains All American case was dismissed was because Delaware had not made a formal demand for compliance with the audit request,” Turner said. “Univar has been served with a subpoena, so Delaware has taken steps to formally compel Univar to provide records. That’s a significant factor that distinguishes Univar’s situation from that of Plains All American.”

 

Ultimately, a decision in the Univar case may provide clarity for unclaimed property holders regarding the state’s audit and estimation practices. 

 

UPPO will continue to monitor and report on the progress of the Univarcase as noteworthy developments occur.  

Tags:  audits  Delaware  estimation  litigation  Plains All American  Temple Inland  Univar 

Share |
PermalinkComments (0)
 
Page 1 of 5
1  |  2  |  3  |  4  |  5
Membership Software Powered by YourMembership  ::  Legal