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Bed Bath & Beyond Inc. doesn’t owe New Jersey the value of store credit certificates abandoned before 2010 because they weren’t escheatable property then, a New Jersey court ruled.
The Sept. 21 decision on two consolidated appeals sheds light on how gift cards may be treated under New Jersey’s unclaimed property statute, which the state amended in 2010 to include escheat of “stored value cards” ( Bed Bath & Beyond, Inc. v. New Jersey Treasurer , N.J. Super. Ct. App. Div., No. A-4880-14T3, 9/21/17 ; BBB Value Services, Inc. v. New Jersey Treasurer , N.J. Super. Ct. App. Div., No. A-2973-14T3, 9/21/17 ).
In its decision, the Appellate Division of the Superior Court of New Jersey reversed two cases over store credit that were consolidated on appeal from the state Treasury department’s Unclaimed Property Administration. The cases involved certificates that Bed Bath & Beyond issues to customers who return merchandise to the store without a receipt. Like some gift cards, the certificates can be used in exchange for products at the home-goods retailer’s stores but can’t be redeemed for cash.
Some themes in the New Jersey decision have the potential to impact other states, according Wilson G. Barmeyer, counsel at Eversheds Sutherland (US) LLP’s Washington office, who provides guidance to clients on unclaimed property.
“Specifically, whether unclaimed property laws apply to items that are not redeemable for cash in the absence of a specific statutory provision that covers them,” Barmeyer told Bloomberg BNA in an email Sept. 22. “The New Jersey Treasurer tried to apply the laws expansively, and the court has rejected that.”
In one case, Bed Bath & Beyond appealed a May 21, 2015 decision that denied the company a refund of unclaimed merchandise return certificates. In the other case, the company’s wholly owned subsidiary, BBB Value Services Inc., appealed a Jan. 14, 2015 denial of a similar refund.
The court reversed the denial in the first case, saying the company wasn’t required under the state’s unclaimed property statute to remit the abandoned funds. In the second case, the court reversed because it concluded that the certificates were the equivalent of “stored value cards” as laid out in the state statute, but their value was remitted prematurely.
“The decision is a recognition of the underlying theory behind unclaimed property law, known as the derivative rights doctrine, which is that the state stands in the shoes of the owner and is entitled to nothing more than the rights of the owner,” Barmeyer said.
“The New Jersey court is saying that the state cannot claim cash where the owner only has the right to goods or services, at least not without a very specific statute that provides for it, and then not retroactively,” he added.
The New Jersey decision is the second such case after a 2016 ruling in California involving Bed Bath & Beyond return certificates, Barmeyer said.
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