The California Superior Court for San Francisco County issued a major decision on Tuesday regarding the State’s use of third-party unclaimed-property auditors. Any company that receives an unclaimed property audit notice from California designating a third-party auditor may want to argue for the removal of the third-party auditor in light of this decision.
The court ruled against the State Controller and held ClubCorp Holdings, Inc. (“ClubCorp”) properly alleged that California cannot use (and could never use) third parties to conduct unclaimed property audits. Specifically, the court found that ClubCorp adequately alleged the state had not satisfied the statutory prerequisite to promulgate official regulations through the Administrative Procedures Act under Civil Code 1571(c). Thus, the court found ClubCorp had properly alleged that California may not use third-party auditors until properly promulgating those guidelines, such that ClubCorp may be entitled to a writ of mandate (a court order prohibiting the audit).
Interestingly, this decision is also set against the backdrop of the Controller staking out the position that it should increase its audit activity in lieu of setting up a VDA program for unclaimed property.
To read the full decision, please visit reedsmith.com.