Keane's Unclaimed Property Blog

The Raw Data Analytics LLC Case May Change the Unclaimed Property Landscape and Liability for the Holder Community!

Update: On October 3, 2019, JP Morgan Chase filed a Notice of Appeal in the Appellate Division of New York’s Supreme Court. The trial court had denied JP Morgan Chase’s Motion to Dismiss, which was converted by the court to a Motion for Summary Judgment. 

Unclaimed property compliance has been on the rise since the early 2000s. Many companies are aware of state unclaimed property laws, programs, and annual filing requirements. State auditors, third party audit firms, and amnesty programs such as voluntary disclosure agreement (“VDA”) have also contributed to the increase in compliance. VDA programs allow companies to become compliant with minimal risk of penalties and interest for late filings.

Many unclaimed property statutes allow states the ability to assess penalties, fines and/or interest for late unclaimed property filings. However, most states utilize a “best practice” approach along with those programs to minimize the enforcement of penalties and interest (P&I). Despite this, the recent decision in the Raw Data Analytics LLC case indicates that statutory language used in many states gives them not just an ability to assess interest, but it could provide a mandate to holders to report and remit such interest prospectively when the past-due property is reported. This is a sharp contrast to the current landscape wherein only a few states actively enforce penalties and interest during annual reporting (e.g. California, Texas, Montana) and certain other states use audits to assess and enforce P&I on a case-by-case basis.

This recent New York State Supreme Court decision could drastically change the economic landscape of the assessment of unclaimed property liability for holders. In February of 2015 Raw Data Analytics LLC (“Relator”) filed a False Claims Act (“FCA”) lawsuit against JP Morgan Chase & Co., (“Defendant”)[1] under the guise of a qui tam action.[2] Raw Data Analytics alleged that JP Morgan Chase & Co.’s unclaimed property reports were fraudulent insofar as the reports failed to include an assessment of interest, and payment to the Office of the State Comptroller (“OSC”) for late unclaimed property. In order to have filed reports inclusive of the interest assessment argued by the Relator to be required to avoid a fraudulent report, JP Morgan Chase & Co. would have been required to self-calculate the interest amount on all late property. As stated above, self-assessment of P&I has not been an unclaimed property practice and the states that enforce P&I, calculate the amount due after they receive the report.

Based on perceived current practice, JP Morgan Chase & Co. submitted a motion for dismissal on August 12, 2016. The motion was converted to a Motion for Summary Judgment, which was denied on August 30, 2019. The Court’s opinion stated that New York’s Abandoned Property Law (APL) is unambiguous in its requirement that the interest payments are required without any further action or notice from the state.

As stated above, only a few states actively charge holders interest, fines, and/or penalties for out of compliance unclaimed property filings. Many states, such as New York, have statutes addressing interest, fines, or penalties for late or incomplete unclaimed property reporting but have not historically pursued holders for such interest or penalties. States often retain the discretion to waive or decrease the statutorily defined interest, fines, and penalties. Specifically, concerning interest, holders currently do not self-assess and calculate possible interest due on the past due property. Nor do they remit the self-assessed interest amount with the escheatment report.

The outcome of this litigation will have a significant impact on the future of unclaimed property either way. Therefore, holders and the unclaimed property community will be paying close attention. We will continue to track the developments and provide updates; however, the best approach to unclaimed property is compliance and escheatment reduction. A proactive outreach program will help alleviate liability and reduce exposure.

[1] New York ex. rel. Raw Data Analytics LLC v. JPMorgan Chase & Co., N.Y. Sup. Ct., No. 100271/2015, 8/30/19
[2] Under the New York False Claims Act § 190 (2) (a) any person may bring a qui tam civil action for a violation of section one   hundred eighty-nine of this article on behalf of a person and the People of the State of New York or a local government.

Compliance, Escheatment, Litigation, Unclaimed Property, Unclaimed Property Law, Unclaimed Property Reporting

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