Biogen IDEC MA Inc. v. Cahill, Treasurer and Receiver General of Massachusetts (Suffolk Superior Court, Business Litigation Session) 

NELF has recently filed a brief as an amicus (along with Associated Industries of Massachusetts (“A.I.M”) as co-amicus) in support of the plaintiff-appellant in Biogen IDEC MA Inc. v. Cahill, Treasurer and Receiver General of Massachusetts, an administrative appeal currently pending in the Business Litigation Session of the Suffolk Superior Court. The Treasurer has ordered Biogen to pay the Commonwealth $781,251.34 in purported “abandoned property” consisting of outstanding accounts payable on Biogen’s books representing amounts ostensibly owed to other businesses from 1981 through 1999. The case deals with the so-called “business-to-business” exemption under the Massachusetts Abandoned Property Act, G.L. c. 200A (the “Act”), which was enacted in 2000 as one of several amendments to the Act. The exemption provides that “any outstanding credit balances” between businesses arising in the ordinary course of business are not abandoned property under the Act. In general, the Act provides that tangible and intangible property that is unclaimed for three years is presumed abandoned and must be transferred to the Commonwealth (subject to the rightful owner’s ability at any time to prove ownership and reclaim the property). The business-to-business exemption was the fruit of the then State Treasurer Shannon O’Brien’s work with a task force, which included A.I.M. At that time, state treasurers throughout the country had begun attempting for the first time to apply their respective state abandoned property statutes to business-to-business unpaid credit balances, including old outstanding accounts payable, remaining on businesses’ old books. Until then, neither the business community nor the state governments apparently thought that the abandoned property statutes could apply to such book entries, which were often the result of accounting errors and did not represent actual monies owed. A.I.M argued forcefully for the exemption on the dual grounds that these old records were often in error and to the extent that the records were accurate businesses were less likely than individuals to lose track of their assets and have the means and the incentive to recover any monies owed to them without any state intervention. In 2001, shortly after the business-to-business exemption was enacted, then Treasurer O’Brien promulgated regulations appropriately applying the exemption to, among other things, “credits either current or past that are or were owing to a vendor or commercial customer. . . .” Relying on the statutory exemption itself as well as these regulations, Massachusetts businesses, including Biogen, did not report outstanding accounts payable in their abandoned property reports to the Treasurer. In 2004, however, the current Treasurer Cahill issued “emergency” regulations (despite the fact that there was no identifiable emergency) that amended the 2001 regulations and redefined “credit balances” in the exemption to mean only “[o]utstanding balances that are recorded as current accounts receivable or accounts payable of a holder.” (Emphasis added.) Based on these new regulations, the Treasurer began auditing Massachusetts companies (including Biogen) and ordering them to pay to the Commonwealth as abandoned property any outstanding accounts payable more than three years old remaining on their books. And, since these companies did not include such accounts payable in their abandoned property reports (businesses presumably relied on the prior regulations and the clear meaning of the statutory exemption itself), the Treasurer claimed that the six-year statute of limitation also enacted in 2000 did not apply and that in his audits the Treasurer can theoretically recover “abandoned property” shown on the companies’ books from as far back as the Act’s passage in the 1950s. As noted above, as the result of its audit of Biogen, the Treasurer has ordered Biogen to pay $781,251 to the Commonwealth. Biogen exhausted its administrative remedies and then brought its complaint in Superior Court. NELF argues that Biogen’s disputed accounts payable concerning other businesses fall under the plain language of the business-to-business exemption, which has the dual aims of (1) allowing businesses to fend for themselves with respect to outstanding debts and (2) recognizing that business records of this type are frequently flawed and do not reflect any actual monies owed to other businesses (as is the case here). NELF also argues that the current Treasurer’s new regulatory definition of “outstanding credit balances” is nothing more than an invalid attempt to create a windfall for the State because it renders the statutory exemption meaningless. Under the Act, intangible property becomes abandoned only after at least three years. Current accounts payable are by definition not abandoned property under the Act and do not need the exemption because they automatically fall outside of the Act. Finally, NELF argues that, to the extent the Biogen accounts payable at issue in this case consist of records of undelivered and cancelled checks, the Act would not apply even if the Treasurer’s regulations were valid. It is well-established law in Massachusetts that, unless a check is delivered, no obligation to pay and hence no property interest are created that could become abandoned under the Act.