On November 9, 2023, the Michigan Court of Appeals issued a decision on remand in the ongoing Dine Brands litigation. In the decision, the Court of Appeals held, assuming that an examination is an “action or proceeding,” the state does not need to file a lawsuit to enforce unclaimed property liability within the statute of limitations. This marks a significant change from the Court of Appeals prior decision in Dine Brands, which had held the state must file a lawsuit to enforce unclaimed property liability within the statute of limitations, even if the state had started an examination of the holder within 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.”1 In a January 19, 2023 decision, the Court of Appeals 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 to the Michigan Supreme Court, and on September 15, 2023, the Michigan Supreme Court issued an order remanding the case to the Court of Appeals with directions to consider the following questions: “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.” The Michigan Supreme Court’s September 15, 2023 order was not a decision on the merits, and did not decide whether an examination is an action or proceeding for purposes of MCL 567.250.
On November 9, 2023, the Court of Appeals issued its revised opinion addressing these questions. The Court of Appeals concluded that, under the assumption mandated by the Supreme Court, the state is not barred from filing an action to enforce unclaimed property liability by the statute of limitations when it started an examination within the statute of limitations.2 The Court of Appeals explained that, if an examination is considered a “proceeding” for purposes of MCL 567.250(2), the Supreme Court’s first question regarding tolling does not require an answer as the statute only “…requires that an action or a proceeding be commenced within the applicable time period.” The Court concluded that the Legislature’s use of the word “or” in crafting this provision indicates that defendant could choose to either begin a proceeding (examination) or commence an action. The Court found that if defendant did so in a timely fashion, tolling is irrelevant.
The Court of Appeals went on to say that plaintiffs’ original challenges to the state’s final decisions were not based on the merits of those decisions, but only on the assertion that the statute of limitations had expired as it pertained to the enforcement of those decisions (and not the start of the examinations). The Court concluded that this was an impermissible defense against administrative decisions that began as timely examinations and noted that there is no statutory time limit for issuing an initial decision under MCL 567.251a.
In answering the Supreme Court’s second question, the Court of Appeals again cited MCL 567.251a, explaining that this provision allows the state to issue a final decision after determining that a holder has failed to deliver unclaimed property. Any challenge to that decision must be initiated by the holder under MCL 567.251a(1).
Although the Court of Appeals decision on remand appears to generally be less favorable to holders than the initial decision, this is unlikely to be the last word on this issue. The Michigan Supreme Court still has not addressed the merits of the case and retained jurisdiction when it remanded to the Court of Appeals for further proceedings.
Dine Brands has the potential to impact any holder with an outstanding Michigan audit or with potential unclaimed property exposure in Michigan. Thus, holders with pending unclaimed property audits in Michigan should consider how to view the statute of limitations period for their audits and consider other legal arguments that may be available to mitigate exposure. Holders should also consider the impact that this decision and any further developments in the Dine Brands litigation could have in the other states that have statutes of limitations with language similar to Michigan’s.
- See MCL 567.250(2). For more information, see our prior alerts: Michigan Unclaimed Property Update: Treasurer Files Motion to Stay Decision in Dine Brands and Threatens to File Suits Against All Holders Under Audit and Unclaimed Property: Fall Update
- Dine Brands Global, Inc. v. Rachael Eubanks, Court of Appeals No. 360293 (Nov. 9, 2023).
Client Alert 2023-254
