As reported earlier, the Michigan Court of Appeals agreed with the Circuit Court for Oakland County that two companies, Disney1 and Dine Brands,2 were not required to turn over unclaimed property to the state for transactions that were incurred outside the statute of limitations period. With input from an appellate panel of three judges, the Court of Appeals issued a revised opinion on November 9, 2023, concluding that the state is not barred from enforcing these actions because the examination was commenced within the statute of limitations. Upon remand to the Court of Appeals, the state Supreme Court retained jurisdiction and agreed to hear oral arguments on Treasurer Rachael Eubanks’ request to find that the audits of the two companies paused the statute of limitations.
The Michigan Court of Appeals initially agreed with the companies’ position, finding that the start of an audit conducted by the Michigan Treasury does not toll the statute of limitations for years exposed to audit. The statute in Michigan 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.”3 The Department responded that under the language of the statute, an examination fell under the meaning of an “action or proceeding,” which tolls the statute of limitations. The Court of Appeals did not agree with the Department, which led to the current appeal under consideration.
In January, the Supreme Court agreed to hear oral arguments addressing Treasurer Eubanks’ applications for requesting a review of the lower court rulings. The issues to be addressed in this review include the following:
- Whether the Court of Appeals erred in finding that the audits are not actions or proceedings;
- If so, whether the start of the examination paused the statute of limitations; and
- Whether the state must still file a lawsuit to prevent legal actions from being time-barred.
While Eubanks maintains that the decision as it stands would compel the Department to file hundreds of lawsuits to prevent the expiration of the statute, the two companies expect that the decision would compel the Department to complete audits in a more efficient manner to comply with the statute of limitations.
We will keep you updated on the decision of the court as this issue could impact states with similar statutes. Please contact our unclaimed property professionals below with any questions.
1 The Walt Disney Co. v. Rachael Eubanks, Case number 360291, 2023 WL 324594, Michigan Court of Appeals (January 19, 2023).
2 Dine Brands Global Inc. v. Rachael Eubanks, Case number 360293, 2023 WL 324426, Michigan Court of Appeals (January 19, 2023).
3 See MCL 567.250(2).
TECHNICAL INFORMATION CONTACTS:
Mark A. Paolillo
Principal
Ryan
857.288.1976
mark.paolillo@ryan.com
Susan Han
Principal
Ryan
442.244.2447
susan.han@ryan.com
Jeff Henshall
Principal
Ryan
404.682.1200
jeff.henshall@ryan.com
Christopher Jensen
Principal
Ryan
469.399.4142
christopher.jensen@ryan.com
Sonja Roman-Molina
Principal
Ryan
954.740.6255
sonja.roman@ryan.com
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.