On March 24, 2025, the Michigan Supreme Court issued its decision in Dine Brands Global, Inc. v. Eubanks1 concerning whether an unclaimed property audit is an “action or proceeding” for purposes of the state’s ten year period to enforce the Michigan Unclaimed Property Act (the “Act”) and how that limitations period may apply to audit findings. The court held that while an examination is an “action or proceeding” under MCL 567.250(2), an examination does not toll the statute of limitations, so the Act’s time limitations on the Treasurer’s ability to enforce a holder’s duty under the Act continues to run during the audit. However, the court introduced the question of whether a notice of determination at the conclusion of such an audit creates a new duty under the Act and whether that subsequent duty may be enforced by the Treasurer. Resolution of that question, the Court explained “will turn on whether MCL 567.251a and MCL 567.255 interact to impose a legal duty of postexamination compliance on a holder that is distinct from the annual duty to report and remit abandoned property.” However, since that question was neither fully briefed before the Supreme Court or in the proceedings below, the Court remanded the case for further consideration.
Background
In 2013, Michigan initiated audits against two Dine Brands and the Walt Disney Company as part of multi-state unclaimed property examinations seeking records as far back 2002. Those audits were not concluded until until 2021, when Michigan issued “notice of examination determinations” seeking in excess of $750,000 collectively from the two holders. The holders then filed suit in circuit court seeking a declaratory judgment and injunction seeking to prevent Michigan from enforcing the notices on the grounds that the audit findings encompassed years for which enforcement was barred by Michigan law. In support of that argument, the holders relied upon 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 … [Michigan’s unclaimed property law] more than 10 years… after the duty arose.”2 The holders argued that an audit is not an “action or proceeding” that would toll the statute, so any findings could be enforced only for reporting obligations within the limitations period. In short, the Treasurer could no longer enforce the earlier years reviewed in the audit.
The circuit court granted declaratory judgment and an injunction in favor of the holders, and in a January 19, 2023 decision, the Court of Appeals affirmed. The Court of Appeals concluded that an audit is distinct from “an action or proceeding” and does not toll the statute of limitations for the Treasurer to enforce audit findings. As a result, the court found that MCL 567.250(2)’s then-year limitation continues to run (and cut off potential enforcement proceedings) 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.”3 On November 9, 2023, the Michigan Court of Appeals issued an advisory opinion on remand holding that, 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. The case then returned to the Michigan Supreme Court.
The Arguments to the Michigan Supreme Court
On October 10, 2024, the Michigan Supreme Court heard oral arguments concerning whether an examination is an “action or proceeding” and how the limitations period applies to audit findings.
The Treasurer argued that holders have no right to dispute unclaimed property findings and that the state could need 20+ years to review corporate records. The Treasurer’s argument suggested that the state can participate in multi-state audits for an unlimited period of time, and that there should be no right of the holder to dispute audit findings other than through the appeals process. The Treasurer asserted that once the state identifies property for the company to pay, criminal liability attaches for any dispute, and the Treasurer then should have ten more years to bring an enforcement action in court.
By contrast, the holder argued that although the Treasurer may audit to identify property it views as reportable, any resulting audit findings (to be enforceable) must conclude within ten years from when the putative property was reportable to the state. To the extent that such findings are disputed, the holders argued, the Treasurer must seek to enforce its position through a judicial action within those same ten years. The holder also has the option to appeal findings, but where the Treasurer fails to bring an enforcement action with the ten year period, the holders asserted that MCL 567.250(2) clearly and unambiguously bars such efforts.
The Unclaimed Property Professionals Organization, or UPPO, is a trade organization that offers unclaimed property compliance education, networking, and advocacy made up of unclaimed property holders, owners, and associated service providers. UPPO filed an amicus brief (authored by Reed Smith attorneys and other holder advocates) to provide the Court with additional background concerning Michigan’s audit practices. In particular, UPPO noted that the Treasurer often struggles to complete examinations within the statute of limitations because of its reliance on third party-auditors with an economic incentive to conduct broad and far-reaching exams. In support of this claim, UPPO’s brief cited a survey of its members concerning the length of unclaimed property audits, provided examples of broad requests for numerous records over an extensive period of time, and noted recent court disapproval of the audit methodologies imposed by those multi-state auditors. In light of that backdrop, UPPO asserted that the policy interests of certainty, finality, and efficiency recognized by the Michigan legislature in enacting MCL 567.250(2)’s statute of limitations supported the holders’ position. UPPO also noted the harm that would be done to those policy interests if the Court were to adopt the Treasurer’s construction of the statute.
The Court’s Decision
Initiation of an Audit
The Michigan Supreme Court’s March 24, 2025 decision held that an examination is not an “action,” but is a “proceeding” under MCL 567.250(2). It seemed to ground that decision in the Treasurer’s right to review record related to the “lookback” period, consistent with record retention requirements. The court suggested it would be absurd to find that an audit is not a proceeding, because if that were the case, “the Treasurer’s examinations could not encompass all records within that period because the statute of limitations for the oldest records would continually expire during the examination.” However, issuing a notice to conduct an audit, the court found, does not toll the statute of limitations with respect to contesting the holder’s duty to report or remit property. The court reasoned that the statute of limitations begins to run at the time the holder’s duty arose (i.e. when the holder is required to file and remit unclaimed property) and that the Treasurer’s review of records itself does not create any new duty of payment with which a holder must comply.
In short, the court found that the Treasurer’s notice of examination is a proceeding, which allows it to review records for the limitations period “lookback.” But the notice itself does not impact a holder’s duty to report or remit. In other words, an audit notice governs whether the Treasurer can look, but does not impact what the Treasurer can touch.
Conclusion of an Audit
However, the court left open what could happen at the end of the audit when the Treasurer had determined an amount was to be remitted. It posed the question of whether, at the end of the audit, the Treasurer could issue a notice of determination, which would require a holder to pay previously unremitted amounts, and whether such notice would trigger a new duty on the holder to remit the funds. In other words, could that notice “resurrect” the holder’s requirement to pay previously unremitted amounts, related to years otherwise barred by the statute of limitations?
The court grounded this ambiguity in the penalty provisions in Section 567.255, imposing penalties on holders for failing to comply with its duties to remit unclaimed property generally. In court, the Treasurer argued that it could simply order a holder to remit property, creating a new obligation and triggering penalties for failure to comply. The court ultimately held that whether those penalty provisions interacted with a holder’s right to appeal from a notice of audit determination “to impose a legal duty of postexamination compliance on a holder that is distinct from the annual duty to report and remit abandoned property.” The Supreme Court remanded the case back to the Court of Appeals to determine that question.4
Our Perspective
The Court’s decision in this case represents a partial win for holders in that the court clearly held that the commencement of an examination does not toll the statute of limitations. The scope of that victory, however, is unclear at best. In particular, the possibility of a “separate postexamination duty” left open by the Supreme Court for further consideration could render the ten-year limitation period of scant protection.
It is also unclear what the “postexamination duty” might be. To be sure, the Act imposes an obligation on holders to report and remit unclaimed property, and provides the Treasurer with authority to enforce that obligation (within the ten year period). However, the Treasurer’s ability to enforce the Act does not necessarily encompass some separate authority to order holders to pay property independent of the statutory reporting rules. A notice of determination is, necessarily, the Treasurer’s finding that the holder failed to pay pursuant to its obligations in the time period required under the statute. It seems difficult to reconcile the statutory reporting obligations and limitations period with an untethered ability of the Treasurer to require payment of any amount at any time and restart its window to enforce that “new” obligation.
Nevertheless, the case leaves open whether holders are required to remit payment or appeal amounts included in a notice of determination derived from transactions that, if reportable at all, would be reported in years outside the Treasurer’s statute of limitations. Until the Court of Appeals issues its decision on that question, holders remain with a level of uncertainty and should continue to monitor developments in the case. In the meantime, holders who are currently under audit have much to consider while we wait for further guidance. In particular:
- Holders must consider whether they appeal any (seemingly time-barred) notices of determination or argue that the notice is not subject to enforcement by the Treasurer;
- Although the Court’s decision leaves open the question of whether a notice of examination determination “resurrects” the statute of limitations, we expect that Michigan will face an uphill battle in prevailing on this question. This may give holders significant leverage in resolving audits.
- Holders should be prepared to make a decision quickly if Michigan issues a notice of examination determination, as there is a limited window of time to file an administrative appeal.
- This is the first decision to construe the statute of limitations under the 1981 Uniform Unclaimed Property Act. Holders should evaluate the weight that this decision will carry in other states that use this same statutory language, as courts tend to defer to other states’ construction of uniform statutes.
- Holders should review the years included in any ongoing audit, both in Michigan and in any other state that has a statute of limitations on enforcement with language similar to Michigan’s to determine a strategy for preserving the argument that the statute of limitations on enforcement has closed for any of the years included in the audit.
- Dine Brands Global, Inc. v. Eubanks, Michigan Supreme Court Case No. 165391, consolidated with The Walt Disney Company v. Eubanks, Michigan Supreme Court Case No. 165392 (March 24, 2025)
- For more information, see our October 14, 2024, January 12, 2024, November 13, 2023 and April 6, 2023 alerts.
- 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.
- The Treasurer has until April 14th to file a motion of reconsideration should it choose to do so
In-depth 2025-104
