- Two rulings from states and an SEC order, all involving unclaimed property, are impacting holders
- Mich. Supreme Court’s remand of Dine Brands creates uncertainty on statute of limitations
- Calif. Superior Court decides whether returned mail is needed to trigger securities abandonment
- SEC sheds light on who could be responsible for adverse escheatment consequences
The past few months have been a busy time in the unclaimed property space. In addition to the normal fall reporting deadlines, there have been three major developments involving unclaimed property that impact holders.
First, the Michigan Supreme Court has remanded Dine Brands Global, Inc. v. Eubanks, a case that involves the interpretation of the statute of limitations for enforcing unclaimed property liability and that was decided in favor of the holder by the Michigan Court of Appeals.1
Second, the California Superior Court has held, in Investment Company Institute v. Cohen, that a security may be escheatable if a holder mails a due diligence notice and does not receive a response (even if the notice is not returned as undeliverable).2
While Dine Brands and Investment Company Institute address important questions and have the potential to impact a significant number of holders, neither case is final and both create additional ambiguities with respect to compliance.
Third, the Securities and Exchange Commission has entered a consent order in In re DST Asset Manager Solutions, Inc. that has the potential to impact best practices regarding escheatment for transfer agents and mutual funds.3 The DST consent order is not binding on third parties and drew a dissent from two of the SEC’s commissioners, but it nevertheless provides insight into the SEC’s approach to escheatment.
Michigan: Dine Brands remanded, creating uncertainty on the statute of limitations
Dine Brands involves the interpretation and application of MCL 567.250(2), which provides that “an action or proceeding shall not be commenced by the administrator with respect to any duty of a holder under this act more than 10 years… after the duty arose.” The Court of Appeals had concluded that an examination is not an action or proceeding and, thus, does not toll the statute of limitations to enforce an unclaimed property liability. In other words, unclaimed property reporting years can become barred from enforcement during the course of an ongoing audit.
The Michigan Treasurer appealed the Dine Brands decision to the Michigan Supreme Court on March 2, 2023.4 On September 15, 2023, the Michigan Supreme Court issued an order—not deciding whether or not to accept the case on appeal—but instead, remanding Dine Brands to the Court of Appeals to consider the specific questions.
The Michigan Supreme Court asked the Court of Appeals to consider the following: “assuming that an examination is a ‘proceeding’ for purposes of MCL 567.250(2): (1) whether the commencement of the examination tolled the statute of limitations in MCL 567.250(2); and (2) whether the Treasurer must still file a lawsuit within the applicable time frame to avoid the lawsuit being time-barred.” This question is important because MCL 567.250(2) does not contain an express provision that tolls the statute of limitations while an action or proceeding is pending, so it is possible that the Treasurer timely commenced an action or proceeding by starting an examination within ten years but that the Treasurer would still be barred from filing a subsequent action to enforce any liability discovered during that examination.