DALLAS, March 11, 2016 /PRNewswire/ -- An important California state court unclaimed property decision has just been rendered, yielding good news for issuers of merchandise or store credits. By way of factual background, Bed, Bath & Beyond Inc. ("BB&B") issued Merchandise Return Certificates (MRCs) as a courtesy to customers who attempted to return merchandise at its stores but who had no receipt evidencing the actual purchase. BB&B was not obligated in such instances to accept these returns or to give cash back to the customer. The MRCs, by their express terms, were redeemable only for merchandise at BB&B and its affiliates, were not redeemable for cash, and were not subject to any expiration date. Specifically, for an MRC recipient to redeem the certificate, the recipient must have purchased merchandise at BB&B and presented the certificate. BB&B reported and remitted to California as unclaimed property between 2004 and 2012 the cash value equal to the full unredeemed balances of the MRCs that were issued to California customers who returned merchandise to BB&B without a receipt, and for which the three-year dormancy period had passed. The total amount of MRCs remitted to California for such years was $1,834,477.62.
BB&B filed a claim with the California State Controller's Office in 2013, requesting a refund for amounts erroneously paid to California with respect to such MRCs. The refund claim was subsequently denied. Plaintiff BB&B then sued Defendant John Chiang, both individually and in his capacity as California State Controller, alleging that it had mistakenly remitted sums attributable to the unredeemed MRCs, and sought a refund of such amounts. In its first and second causes of action of its First Amended Complaint, the Plaintiff argued it was entitled to a refund under California law [i.e., CCP Section 1540 and/or CCP Section 1561(b)]. Plaintiff filed a Motion for Summary Judgment, and a recent hearing was held before Judge Lewis, Superior Court of California, County of San Diego. Highlights of the Judge's March 4, 2016, Minute Order ("Order") are as follows:
This decision is important for several reasons. First, given the relative lack of published authorities pertinent to whether merchandise credits are escheatable by the states, it provides helpful authority for the position that store or merchandise credits (structured so they are not redeemable for cash and do not expire) should not be escheatable in California. Second, for holders who might have erroneously paid similar store or merchandise credits to the state of California, it may provide a window of opportunity for pursuing and obtaining a refund from the state, as was done in this case. It is unlikely the state would remotely consider any claims to refund before the decision to appeal (or accept) this decision has been made. Holders seeking additional clarification on how these matters relate to their specific factual situations may contact their designated Abandoned and Unclaimed Property (AUP) representative or one of the Ryan contacts below.
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Ryan is an award-winning global tax services firm, with the largest indirect and property tax practices in North America and the seventh largest corporate tax practice in the United States. With global headquarters in Dallas, Texas, the Firm provides a comprehensive range of state, local, federal, and international tax advisory and consulting services on a multi-jurisdictional basis, including audit defense, tax recovery, credits and incentives, tax process improvement and automation, tax appeals, tax compliance, and strategic planning. Ryan is a three-time recipient of the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service. Empowered by the dynamic myRyan work environment, which is widely recognized as the most innovative in the tax services industry, Ryan's multi-disciplinary team of more than 2,100 professionals and associates serves over 12,000 clients in more than 40 countries, including many of the world's most prominent Global 5000 companies. More information about Ryan can be found at ryan.com.
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