No 'false claim' for not filing UP report, Delaware Supreme Court holds

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July 2020

Overview

The Delaware Supreme Court recently held that a retailer’s failure to file unclaimed property reports for gift cards managed under an agreement with a third party did not subject the retailer to treble damages under the state’s False Claims and Reporting Act.

[Overstock.com, Inc. v. Delaware ex rel. French, Del., No 327, 2019, 6/24/2020]

The takeaway

This decision has implications beyond the retail and gift card context in which it arose. False Claims Act actions are a concern in many states where conflicting interpretations could result in an asserted failure to report property to the appropriate state. The decision’s application could be limited, however, where unclaimed property holders file reports but are faced with qui tam actions asserting underreporting or failure to include certain property types in the report. Further, its application could be limited in those states that have expanded their False Claims Act provisions to encompass a holder that “knowingly conceals or knowingly and improperly avoids or decreases an obligation,” as this language could be applied to the failure to file a report.

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Peter Michalowski

State and Local Tax Leader, PwC US

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