In two recent cases,1 the Michigan Circuit Court for Oakland County ruled that two companies, Disney and Dine Brands, did not have to turn over unclaimed property to the state for transactions that were incurred outside the statute of limitations period. In virtually identical facts, the cases addressed assessments that exceeded the Uniform Unclaimed Property Act’s2 (“UUPA’s”) statute of limitations as adopted by the state of Michigan for escheating unclaimed payroll and accounts receivable. The UUPA is a uniform compact that in some form has been adopted by 35 states and two U.S. territories, including Michigan.
The issue in both Disney and Dine Brands was the literal interpretation of the statute of limitations for the assessment of unclaimed property under the Michigan statute of limitations for unclaimed property assessments. Both companies agree that the plain language of the statute bars an unclaimed property action or proceeding regarding “any duty of a holder under [the UUPA] more than 10 years, or, for the holder of records of transactions between 2 or more associations…more than 5 years, after the duty arose.” Said duty under the law includes the obligation to report and remit unclaimed property on or before July 1 of each year to include the property abandoned in the 12-month period ending on the immediately preceding March 31.
At approximately the same time in 2013, the state of Michigan began an unclaimed property examination of both companies’ filings going back to 2003 using a private third-party audit firm. The multistate examination included Michigan and 15 states and continued for at least six years. Without the execution of a waiver of the statute of limitations, much of the ultimate assessments were out of statute, according to the two companies. The state, however, contended that the state’s statute extends 10 report years back from the date the state notified the companies of the examination in 2013. This would give the state access to reports going back to 2003 for purposes of assessments in 2021.
The Circuit Court disagreed with the state’s interpretation that the commencement of the examination is the commencement of the “action or proceeding” for purposes of MCL 567.250(2). The statement that the state must “commence an action or proceeding” within the statute of limitations does NOT encompass sending an audit letter or conducting an audit. According to this case, the “commence an action or proceeding” language means filing a lawsuit and not sending an audit notice. The state’s failure to file an enforcement action seeking the unclaimed property at issue results in an action outside of the statute of limitations. The plain language of the statute requires actions to be filed within the applicable statute of limitations, regardless of whether an examination is timely executed or completed.
The language in this statute of limitations is present in the statutes of most states. Companies should be aware of the statute and these cases as they are being audited by a state. Many times, audits of unclaimed property linger over a protracted period of time. Ryan’s unclaimed property team is here to assist in evaluating any audit assessment and assisting in a protest of assessments outside of the statute of limitations period.
1 Dine Brands Global, Inc. v. State of Michigan, Circuit Court of Oakland Case No. 2021-189420-CZ (1-24-22.); The Walt Disney Company v. State of Michigan, Circuit Court of Oakland Case No. 2021-189464-CZ (1-24-22.)
2 MCL 567.221 et seq.
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