On Tuesday, July 14, 2015, at their Annual Meeting the Uniform Law Commission (ULC) completed their first reading of the Revised Uniform Unclaimed Property Act (RUUPA or the Act). While over half of the sections comprising the current draft of the Act were passed over due to strict time constraints imposed by the ULC President Harriet Lansing, the RUUPA Drafting Committee (Committee) did their best to focus the time they did have on sections they felt were most in need of feedback from the ULC Commissioners (Commissioners) as a whole. The Committee even went so far as to invite discussion by allowing American Bar Association (ABA) Advisors and National Association of Unclaimed Property Administrators (NAUPA) to explain their stances on hot button issues such as the derivative rights doctrine, life insurance provisions and the inclusion of a business-to-business exemption. Despite this attempt, Commissioner feedback was sparse (to non-existent) for a majority of the reading and was often technical in nature when provided. While over 250 of the 400 Commissioners were present at the Annual Meeting, only about half of those present attended the morning session of the RUUPA reading. After a lunch break, the afternoon session of the reading was even more sparsely attended, with less than 100 Commissioners present. While the turnout and participation was not ideal, the Committee provided some guidance to the Commissioners that may be useful to interested parties going forward.
- Committee Co-Chair Rex Blackburn made it clear that they would be considering the application of the derivative right doctrine, which generally stands for the proposition that state unclaimed property administrators cannot receive greater rights than those of the true owner, on a property-type basis (as opposed to a blanket inclusion or exclusion). Aside from the short ABA-NAUPA debate on the issue, there was no substantive discussion of the derivate rights doctrine.
- A return to the 1981 Act’s 10-year statute of repose was discussed. Commissioner Raymond Pepe noted that the Committee reverted back to this based on the widespread abuse of statistical sampling. Several Commissioners were supportive of this change, and even encouraged the Committee to shorten this period further since the statute does not begin running until after the report was due. Nebraska Commissioner Harvey Perlman suggested that the Committee simply limit the use of abusive statistical sampling instead of establishing a statute of repose. The Committee responded that a bright-line rule is necessary here to provide certainty.
- The Committee confessed that the current section on the conduct of audits (Section 20) needs to be broken out into four distinct sections in the next draft. A majority of the discussion in this area was on the use of contingent fee contract auditors—which is permitted in the current draft with numerous protections that seek to enhance the transparency of this process. Connecticut Commissioner David Biklen suggested that his state would not be able to audit holders without the use of contract auditors and expressed concern that the provision effectively reprimands state administrators. Reporter Charles Trost responded that NAUPA has approved these provisions and they are intended to shine light on the abusive practices of some (but not all) states.
- In a somewhat rushed discussion of the administrative appeal alternatives, there was a consensus among participating Commissioners that review under the state Administrative Procedure Act (APA) is sufficient under Alternative B, as opposed to establishing an independent tribunal. As drafted, a state can elect to adopt an informal appeals process or require appeals to go through the state APA. Given the feedback from Commissioners, it appears highly unlikely that the establishment of an independent tribunal to review unclaimed property appeals will be contained in the final product.
- There was a ripe discussion on the life insurance provisions contained in Section 3, and Co-Chair Michael Houghton announced to the Commissioners that he had met with representatives from the life insurance industry and NAUPA within the past week and believes that progress has been made and it is possible to reach an amicable outcome in this area. Despite this, several Commissioners expressed concern with the life insurance provisions as drafted and urged the Committee to not give preferential treatment to the life insurance industry simply because they are heavily regulated by the states. Along these lines, Commissioner Perlman cited to the fact that the Act is not deferential to other state laws for other industries or property types.
- Safe deposit boxes were discussed and various Commissioners expressed the view that expanding the scope of these provisions beyond banks could be problematic and administratively burdensome for businesses like storage facilities and other businesses with lockers for guests to store belongings, such as spas, gyms or amusement parks. NAUPA Advisor Carolyn Atkinson responded that the safe deposit box provision was added at the request of banks and NAUPA has no interest in expanding the provision beyond this industry. Responding to this statement, Co-Chair Houghton said that Committee will reconsider the proposed expansion and likely will not include “other safekeeping depositories” in the next draft.
Rumors are circling that the Act may not be ready for a final reading at next year’s Annual Meeting in July 2016. The limited feedback provided by ULC Commissioner’s will likely not assist the Committee in reaching this goal. The Committee acknowledged that they still have a lot of work to do and the current draft was intended to be a discussion draft to elicit Commissioner feedback. With the next Committee meeting this October, now is the time to begin planning a response to the current draft and first reading. The authors have been active participants in the RUUPA discussions since the inception of the Committee two years ago. There is still room (and time) for significant improvements to be made and interested parties are encouraged to contact the authors well in advance of the next Committee meeting in October to develop a strategy.