Examinations Are “Proceedings,” Not Tolling Events, Under Michigan’s Unclaimed Property Act

Examinations Are “Proceedings,” Not Tolling Events, Under Michigan’s Unclaimed Property Act

Introduction

In a unanimous decision authored by Justice Welch, the Supreme Court of Michigan resolved a long-simmering dispute over the meaning of “action or proceeding” and the effect of administrative audits under the Uniform Unclaimed Property Act (UUPA), MCL 567.221 et seq. The consolidated cases—Dine Brands Global, Inc. v. Eubanks and The Walt Disney Company v. Eubanks—arose from multi-state examinations initiated by Michigan’s State Treasurer in 2013, conducted by a third-party auditor, Kelmar Associates, to determine whether the companies had complied with their annual reporting and remittance duties for unclaimed property (notably, wages and accounts payable).

The dispute focused on three core questions:

  • Whether an “examination” under the UUPA is an “action or proceeding” within the statute of limitations provision, MCL 567.250(2).
  • Whether commencement of an examination tolls the 5- or 10-year limitations period.
  • Whether the Treasurer must still file a lawsuit within the limitations period to avoid time bar, even if an examination is a “proceeding.”

The Court held that an examination is a “proceeding” but it does not toll the limitations period. Importantly, the Court remanded for resolution of an unsettled, potentially outcome-determinative issue: whether issuance of a “notice of examination determination” under MCL 567.251a, together with the penalty scheme in MCL 567.255, creates a distinct, post-examination duty that carries its own limitations period separate from the annual duty to report and remit under MCL 567.238 and MCL 567.240.

Parties: Plaintiffs were Dine Brands Global, Inc. (Applebee’s, IHOP) and The Walt Disney Company; Defendant was Rachael Eubanks, in her official capacity as Michigan’s State Treasurer.

Summary of the Opinion

  • “Action or proceeding” includes administrative examinations. The phrase in MCL 567.250(2) encompasses both formal court actions and formal administrative processes related to compliance and enforcement. An examination under MCL 567.251 and 567.251a is a “proceeding.”
  • No tolling during examinations. Commencing an examination does not toll the UUPA limitations period; the 5- or 10-year clock keeps running. The Legislature knows how to include tolling and did not do so in the UUPA.
  • Key unresolved issue remanded. The Court remanded for the Court of Appeals to decide whether, after a notice of examination determination issues, a distinct, post-examination duty arises (under MCL 567.251a and 567.255) that would carry its own limitations period, and what that means for the scope of property subject to enforcement.
  • Dispositions. The published Court of Appeals opinions (345 Mich App 227 and 345 Mich App 213) were reversed. The January 11, 2024 unpublished decision on remand was affirmed in part and vacated in part, and the cases were sent back to the Court of Appeals for further proceedings.

Background

The UUPA presumes abandonment of certain property after defined periods (generally three years; one year for wages over $50) when it remains unpaid or unclaimed. Once property is presumptively abandoned and connected to Michigan (e.g., owner’s address in Michigan), holders must:

  • Annually report the property (MCL 567.238) by July 1 for the preceding 12 months, after performing due diligence to notify apparent owners (MCL 567.238(5)).
  • Pay or deliver the reportable property at the time of filing (MCL 567.240(1)).
  • Maintain records for 10 years for identified owners, and 5 years for holders of records of transactions between two or more “associations” as defined in MCL 567.257a(2) (MCL 567.252(1)).

The Treasurer enforces compliance via three mechanisms:

  • Demand a verified report (MCL 567.251(1));
  • Conduct an examination (audit-like process) culminating in a notice of examination determination (MCL 567.251(2); 567.251a(1), (15)); and
  • Bring a court action to enforce the Act (MCL 567.253).

In 2013, the Treasurer initiated multistate examinations of Disney and Dine Brands through Kelmar, going back to 2002. In 2021, notices of examination determination issued, concluding that each plaintiff held reportable abandoned property. Neither company sought reconsideration or an administrative appeal under MCL 567.251a; instead, both filed circuit court actions seeking prospective declaratory and injunctive relief, arguing the Treasurer’s enforcement would be time-barred under MCL 567.250(2). The circuit court agreed; the Court of Appeals initially affirmed; the Supreme Court remanded for targeted questions; and after additional proceedings, the Supreme Court issued the present decision.

Detailed Analysis

1) Precedents and Authorities Cited

  • Dictionaries and textual canons: The Court relied on contemporaneous lay and legal dictionaries to assign ordinary meanings to “action” and “proceeding,” and invoked canons to give each word distinct effect and to respect disjunctive usage of “or.” See Black’s Law Dictionary (6th and 12th eds); Webster’s New World Dictionary (1988).
  • Model Act commentary: The UUPA is based on the Model Uniform Unclaimed Property Act (1981). Although the 1981 commentary to § 29(b) speaks about an “action,” the Court declined to read the phrase “action or proceeding” as a term of art limited to litigation, in light of grammar and Michigan’s text.
  • Michigan cases:
    • Epps v 4 Quarters Restoration LLC, 498 Mich 518 (2015) and CAM Constr, 465 Mich 549 (2002): “action” commonly denotes a lawsuit.
    • Mair v Consumers Power Co, 419 Mich 74 (1984): courts do not infer tolling absent statutory language; administrative proceedings did not toll the RJA limitations provision at issue.
    • State Farm Fire & Cas Co v Old Republic Ins Co, 466 Mich 142 (2002): avoid surplusage.
    • US Fidelity & Guaranty Co v Mich Catastrophic Claims Ass’n (On Rehearing), 484 Mich 1 (2009): different words are presumed to have different meanings.
    • Mich Pub Serv Co v Cheboygan, 324 Mich 309 (1949): “or” is disjunctive.
    • Meyers v Barlock, 281 Mich 629 (1937); People v Bobek, 217 Mich App 524 (1996): “proceeding” depends on context and can refer to stages or procedures.
  • Federal cases:
    • United States v Kirst, 54 F4th 610 (9th Cir 2022); United States v Fruchtman, 421 F2d 1019 (6th Cir 1970): “proceeding” can include administrative investigations.
    • Sexton v Panel Processing, Inc., 912 F Supp 2d 457 (ED Mich 2012): “proceeding” encompasses procedural means for redress in tribunals or agencies.
  • Statutory comparators: Delaware and North Dakota explicitly toll the statute upon audit notice; Michigan does not. Compare Del Code Ann, tit 12, § 1156(b) and ND Cent Code § 47-30.2-39(4) with MCL 567.250(2).

2) The Court’s Legal Reasoning

Action vs. Proceeding. The Court parsed MCL 567.250(2): “an action or proceeding shall not be commenced … with respect to any duty of a holder … more than 10 years [or 5 years for certain association-to-association records] after the duty arose.”

  • “Action” means a lawsuit filed in a court. This reading harmonizes with numerous UUPA provisions that speak of an “action in” court (e.g., MCL 567.247; 567.251a; 567.253; 567.254(4)-(5)).
  • “Proceeding” is broader, encompassing not only judicial processes but also formal administrative investigations and procedures—here, the Treasurer’s examination and the associated processes codified in MCL 567.251 and 567.251a. The disjunctive “or” signals two alternative pathways to satisfy the limitations statute: commence either an action or a proceeding within the period.
  • Structural harmony. Reading “proceeding” to include examinations ensures coherence with:
    • the UUPA’s administrative architecture (examination, notice of determination, reconsideration process);
    • the rulemaking authority to formalize audit standards (MCL 567.251(4), 567.260);
    • the 2014/2015 amendments (MCL 567.251a, 567.251b) that created a structured appeal process and, though not an APA contested case, conferred hearing-like rights; and
    • record-retention periods (5/10 years), which would be undermined if examinations could not themselves satisfy the commencement requirement.

No Tolling. The limitations period continues to run during an examination. The Legislature knows how to write tolling rules and did so elsewhere (e.g., MCL 600.5856; MCL 205.27a(3); MCL 500.2833(1)(q)). It did not do so in the UUPA. The Court declined to engraft tolling onto MCL 567.250(2), citing Mair. Other states have explicitly tolling provisions keyed to audit initiation; Michigan does not.

Remand on “Post-Examination Duty.” The statute of limitations runs “with respect to any duty” and from the time “the duty arose” (MCL 567.250(2)). The Court recognized two alternative theories for what “duty” is being enforced after an examination:

  • Single-duty theory (annual duty): Enforcement actions after an exam still target the original annual reporting/remittance duty (MCL 567.238, 567.240). Because examinations do not toll the limitations period, enforcement filed after expiration would be time-barred to the extent premised solely on that original duty.
  • Dual-duty theory (distinct post-exam duty): The combination of a notice of examination determination (MCL 567.251a(1), (15)) and the penalty/interest provisions (MCL 567.255) may create a separate, post-examination compliance duty to pay or deliver identified property—one that could carry its own limitations clock, starting at issuance of the notice. If so, the Court of Appeals must define the scope: What property can be captured by the new duty, especially if the original annual-duty limitation period has run?

The Supreme Court expressly declined to decide this issue on the limited briefing and remanded for the Court of Appeals to resolve whether a distinct, enforceable post-exam duty exists and, if so, its temporal and substantive reach.

3) Impact and Practical Consequences

For the State/Treasurer:

  • Commencement requirement clarified: The Treasurer can satisfy MCL 567.250(2) by timely commencing either a court action or an examination with respect to a holder’s duty.
  • No audit tolling: The Treasurer cannot rely on audit initiation to “stop the clock.” Extended examinations risk portions of older report years becoming unenforceable absent recognition of a distinct post-examination duty on remand.
  • Audit management imperative: Expect process changes to accelerate audits, define scopes tightly, and issue notices of determination more quickly. The Treasurer may also consider filing parallel court actions (where strategy warrants) to obtain the tolling available under MCL 600.5856.
  • Legislative option: If the Legislature wants tolling upon audit notice—like Delaware and North Dakota—it must amend the statute. The Court’s decision signals separation-of-powers restraint in the absence of statutory text.

For Holders (Businesses, Financial Institutions):

  • Exams are “proceedings”: Holders cannot argue that an audit commenced within 5/10 years violates the limitations provision simply because it is not a court action.
  • Limitations defense remains meaningful: Because exams do not toll, holders retain a robust limitations defense for older property unless a distinct post-exam duty is recognized and applied to that property on remand.
  • Record retention and internal controls: Adhere strictly to 10-year (and applicable 5-year) retention, ensure timely annual reports and remittances, and document due diligence to owners. Maintain clear audit trails for report years nearing limitations expiry.
  • Challenge window: After a notice of examination determination, holders have 90 days to seek reconsideration or file a circuit court action (MCL 567.251a(1); 567.247). Missing this window can be outcome-determinative.

For Ongoing and Future Litigation:

  • Open question on remand: Whether a separate post-exam compliance duty exists—and its scope—will shape the reach of Michigan UUPA enforcement going forward. If recognized, it may allow enforcement of property identified in a timely-started examination even if the original annual-duty period has run; if rejected, late-filed enforcement actions may be barred despite a timely audit start.
  • Audit periods and negotiation: Parties may be incentivized to resolve scope and timing early, including potential standstill or tolling agreements, to avoid running out the clock during lengthy examinations.

Complex Concepts Simplified

  • Action vs. Proceeding: An “action” is a lawsuit in court. A “proceeding” can be broader and includes formal administrative processes like a UUPA examination.
  • Statute of limitations (SOL): A law setting how long the Treasurer has to begin an “action or proceeding” regarding a holder’s duty. Under MCL 567.250(2), that is generally 10 years from when the duty arose (5 years for records of transactions between two or more “associations” under MCL 567.257a(2)).
  • Tolling: Pausing or extending the SOL clock. The Court held there is no tolling during an examination because the UUPA contains no tolling provision.
  • Annual duty to report/remit: Holders must annually report unclaimed property and deliver it to the Treasurer (MCL 567.238; 567.240). This duty “arises” on the statutory reporting date (generally July 1 for the prior period).
  • Post-examination duty (disputed): After the Treasurer issues a notice of examination determination (MCL 567.251a), is there a new legal duty to comply, with its own limitations clock? The Court did not decide; the Court of Appeals must.

Timeline Examples

Example A (Annual Duty Framed):

  • July 1, 2010: Holder’s annual report due (duty arises).
  • Feb 1, 2018: Treasurer begins examination (a “proceeding”).
  • June 1, 2021: Notice of examination determination issued.
  • Outcome under this decision:
    • The examination satisfies “commencement of a … proceeding” within the SOL—if started by July 1, 2020 (10 years after July 1, 2010) for general property.
    • But the exam does not toll the clock. If enforcement is still “with respect to” the 2010 annual duty, and any enforcement action is filed after July 1, 2020, the action may be time-barred—unless a distinct post-exam duty exists with its own clock.

Example B (Distinct Post-Exam Duty Framed):

  • Same facts as Example A.
  • If the Court of Appeals holds that a notice of examination determination creates a new duty to comply that arises on June 1, 2021, the Treasurer may have a fresh 10-year period to enforce that duty (subject to defining what property can be encompassed by the new duty).

What the Court Did—and Did Not—Decide About Filing Lawsuits

  • No categorical requirement to sue: The Court agreed with the Court of Appeals that the UUPA does not require the Treasurer to file a lawsuit after issuing a notice of examination determination; holders, not the Treasurer, bear the burden to challenge that decision within 90 days (MCL 567.251a(1)).
  • But timing still matters: Where a holder refuses to comply voluntarily, any post-examination enforcement action (MCL 567.253) may face limitations issues. Whether that enforcement targets the original annual duty or a distinct post-exam duty (if recognized) will determine timeliness.

Key Takeaways for Practitioners

  • Examinations are “proceedings” under MCL 567.250(2), but do not toll the SOL.
  • Holders should calendar the 90-day window to challenge a notice of examination determination (MCL 567.251a(1); also authorized by MCL 567.247).
  • For report years nearing expiry, consider:
    • Negotiating audit timing and scope to avoid running the SOL; and
    • Tolling agreements where appropriate, because statutory tolling does not exist for examinations.
  • Expect further litigation on whether a post-exam duty exists and, if so, whether and how it captures property outside the original annual-duty limitations window.

Unresolved Issues on Remand

  • Does MCL 567.251a’s notice of examination determination, together with MCL 567.255’s penalty scheme, create a distinct legal duty to comply post-examination?
  • If yes:
    • What is the limitations clock for that duty?
    • What is the permissible scope of property subject to that duty, especially for older periods that would be time-barred under the annual-duty clock?
  • If no:
    • Are enforcement actions filed after expiration of the annual-duty limitations period time-barred, even where the examination (a “proceeding”) began timely?

Comparative Note

Michigan’s refusal to infer tolling aligns with a textualist approach and leaves policy choices to the Legislature. Delaware and North Dakota expressly toll their unclaimed property limitations upon audit notice—illustrating that if Michigan desires tolling, it must enact it.

Conclusion

The Michigan Supreme Court has now definitively held that UUPA examinations are “proceedings” that can satisfy MCL 567.250(2)’s commencement requirement, but that audit initiation does not toll the statute of limitations. This dual holding preserves the Treasurer’s ability to start enforcement administratively while protecting holders from indefinite exposure during lengthy examinations. The decision reframes audit strategy on both sides: administrators must manage audits to conclusion more efficiently, and holders should actively monitor the limitations calendar and preserve defenses.

The most consequential issue remains for remand: whether issuance of a notice of examination determination creates a distinct, enforceable duty to comply that restarts limitations—and, if so, the scope of property encompassed. The answer will determine how far into the past Michigan can reach when audits begin on time but outlast the original annual-duty limitations clock. Until that question is resolved, this opinion marks a significant but incomplete rebalancing of Michigan’s unclaimed property enforcement framework.

Note: Justice Thomas did not participate because the Court considered the case before she assumed office.

Case Details

Year: 2025
Court: Supreme Court of Michigan

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