Biogen Idec Ma., Inc. v. Treasurer & Receiver Gen.

• Decision Date: 02 July 2009
• Docket Number: SJC-10344
• Citation: 908 N.E.2d 740,454 Mass. 174
• Parties: BIOGEN IDEC MA, INC. v. TREASURER AND RECEIVER GENERAL.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

908 N.E.2d 740

454 Mass. 174

BIOGEN IDEC MA, INC. v. TREASURER AND RECEIVER GENERAL.

SJC-10344

Supreme Judicial Court of Massachusetts, Suffolk.

Argued April 7, 2009.

Decided July 2, 2009.

David A. Guberman, Assistant Attorney General, for the defendant.

Daniel W. Halston, Boston (Megan Barbero with him) for the plaintiff.

Ben Robbins, Martin J. Newhouse, & Jo Ann Shotwell Kaplan, Boston, for New England Legal Foundation & another, amici curiae, submitted a brief.

Present: MARSHALL, C.J., IRELAND, SPINA, COWIN, CORDY, BOTSFORD, & GANTS, JJ.

SPINA, J.

This appeal requires us to determine which set of regulations promulgated by different Treasurers of the Commonwealth defining the phrase "outstanding credit balances," see G.L. c. 200A, § 5 (outstanding credit balance exemption), applies to certain uncashed checks issued by Biogen IDEC MA, Inc. (Biogen), for purposes of the abandoned property laws, codified at G.L. c. 200A (c. 200A).¹ Treasurer Shannon O'Brien first promulgated regulations interpreting "outstanding credit balances" in 2001. See 960 Code Mass. Regs. §§ 4.00 (2001). Her successor, Treasurer Timothy Cahill, amended those regulations in 2004. See 960 Code Mass. Regs. §§ 4.00 (2004).

In 2003, Treasurer Cahill initiated an audit of Biogen's records to determine whether it had complied with c. 200A. See G.L. c. 200A, § 12 (a). In 2005, an independent auditor, using the amended regulations, concluded that Biogen should have reported $781,251.34 in uncashed accounts payable checks as abandoned property from 1984-2004. Biogen appealed from the auditor's findings, see G.L. c. 200A, § 12 (g), arguing, inter alia, that the amended regulations could not be applied retroactively. A deputy treasurer concluded that the amended regulations could be applied retroactively because they were necessary to correct the definition of "outstanding credit balances" in the original regulations, which he believed was overly broad and in conflict with the statute's language. The deputy treasurer's decision was affirmed by the Treasurer's designee. See G.L. c. 200A, § 12 (h).

Biogen appealed from the Treasurer's final decision to the Superior Court, see G.L. c. 200A, § 12 (i), seeking declaratory relief stating that the amended regulations could not be applied retroactively. Biogen did not dispute that the original regulations, on their face, did not exempt uncashed accounts payable checks, but argued that it was Treasurer O'Brien's policy to interpret the regulations as extending the outstanding credit balance exemption to such checks. In support of this contention, Biogen offered electronic mail messages (e-mails) it received from Treasurer Cahill indicating that Treasurer O'Brien in fact did have a policy of applying the outstanding credit balance exemption to uncashed accounts payable checks. A Superior Court judge allowed Biogen's motion for judgment on the pleadings, vacated the final agency decision, and entered judgment for the Treasurer as to a portion of the auditor's findings that Biogen did not dispute. The Treasurer appealed and we transferred the case to this court on our own motion. We affirm.²

1. Background. Chapter 200A sets forth a comprehensive scheme governing the disposition of abandoned property. The purposes of c. 200A include protecting true owners' rights, bringing additional revenues to the treasury, and providing a procedure for the transfer of abandoned property. Treasurer & Receiver Gen. v. John Hancock Mut. Life Ins. Co., 388 Mass. 410, 423-424, 446 N.E.2d 1376 (1983). Pursuant to G.L. c. 200A, § 5:

"[A]ll intangible personal property not otherwise presumed to have been abandoned under any other section of this chapter, including but not limited to all certificates of ownership, dividends, stocks, bonds, money, drafts and claims for money and credits, except deposits and the increments thereon referred to in [§ 3] that are held or owing in the commonwealth in the ordinary course of the person's business, including all such property held by any fiduciary, shall be presumed abandoned unless claimed by the beneficiary or person entitled thereto within three years after the date prescribed for payment or delivery."

Property presumed abandoned must be reported to the Treasurer in accordance with G.L. c. 200A, § 7.³ The holder of abandoned property must additionally "pay or deliver to the treasurer at the time of filing the report all property presumed abandoned specified in the report." G.L. c. 200A, § 8A (a). The failure to comply with the reporting and property surrender provisions may result in, among other things, see G.L. c. 200A, § 12 (d), (e), a penalty of not more than $500. G.L. c. 200A, § 12 (c). General Laws c. 200A, § 13A, authorizes the treasurer to "to make necessary rules and regulations to carry out the provisions of this section."

In 2000, the Legislature enacted St.2000, c. 198, "An Act relative to abandoned property," and added the following exemption to G.L. c. 200A, § 5:

"Notwithstanding the provisions of the preceding paragraph, any outstanding credit balances to a vendor or commercial customer from a vendor resulting from a transaction occurring in the normal and ordinary course of business shall be exempt from the provisions of this chapter. This exemption shall not apply to unallocated distributions from securities held by financial intermediaries including, but not limited to, brokers, mutual funds, custodians, trust companies and depositories and owing to unknown beneficiaries but held in the intermediary's nominee names."⁴ (Emphasis added.)

St.2000, c. 198, § 2 (outstanding credit balance exemption).

The act introducing the exemption also established an amnesty period during which holders of abandoned property would not, in certain circumstances, be subject to penalties, fines, or interest on unreported abandoned property, St.2000, c. 198, § 4, and required the Treasurer to "conduct an outreach and publicity program to notify business entities and other holders of abandoned property of their obligations under the General Laws, and the amnesty program." Id.

Following enactment of the outstanding credit balance exemption, then-Treasurer Shannon O'Brien promulgated implementing regulations. Pursuant to those regulations, credit balances shall include, but not be limited to:

"[A]ny outstanding credits; overpayments; refunds; vouchers; accumulated value in the form of points, discounts, or other incentive type programs; or any other value potentially due and owing to a vendor or commercial customer; whether currently remaining as a credit, previously resolved, revised, expired, or issued to the vendor or to a commercial customer as a credit memo or repayment. Credit balances shall pertain to credits either current or past that are or were owing to a vendor or commercial customer, whether or not those vendors or commercial customers are currently determinable. Credit balances as used in 960 [Code Mass. Regs. §§ ] 4.00 shall not include consumer retail credits." (Emphasis added.)

960 Code Mass. Regs. § 4.02 (2001).

Title 960 Code Mass. Regs. § 4.03(13) (2001) further provided:

"(a) [A]n exemption shall exist for any outstanding credit balances between vendors or commercial customers resulting from a transaction occurring in the normal and ordinary course of business. This exemption shall apply to all prior and current reporting years.

"(b) Credit balances, as defined in 960 [Code Mass. Regs. § ]4.02, shall not be considered abandoned property, in accordance with G.L. c. 200A, § 5. Credit balances, when they arise in the normal and ordinary course of business, may originate from activity such as overpayments, payment mis-postings, volume discounting, customer relations programs, and payments to satisfy other obligations between two commercial customers, and may take the form of credits credit memos, refunds, vouchers, discount points or programs, and other transactions between the parties."⁵

Seeking to avail itself of the amnesty period, Biogen retained a consultant to bring it into compliance with c. 200A. By October, 2002, Biogen had reported $220,308.74 in abandoned property, omitting certain sums it believed fell within the outstanding credit balance exemption.

By a notice dated September 17, 2003, the deputy treasurer of abandoned property, Mark Cavanagh, informed Biogen that Treasurer Cahill⁶ was invoking his right to examine Biogen's records to determine whether Biogen had complied with the reporting requirements, see G.L. c. 200A, § 12 (a) ("The treasurer may at any reasonable time and upon reasonable notice examine the records of any person to determine if said person has complied with the provisions of the chapter"), and had retained Kelmar Associates, LLC (Kelmar), an independent accounting firm, to serve as an auditor on the Treasurer's behalf.

On February 12, 2004, while Biogen's audit was underway, Treasurer Cahill filed a notice of the adoption of emergency amendments concerning the outstanding credit balance exemption. See G.L. c. 30A, § 2, fifth par. The emergency regulations defined "credit balances" differently from the original regulations,⁷ and changed the circumstances in which the outstanding credit balance exemption applied.⁸ On June 18, 2004, Treasurer Cahill filed the final version of the amendments, which are nearly identical to the emergency regulations. Pursuant to the final amended regulations, "[c]redit [b]alances" are:

"Outstanding balances that are recorded as current accounts receivable or accounts payable of a holder. The balance must have been generated in the normal and ordinary course of business between the holder and a then current commercial customer."

960 Code Mass. Regs. § 4.02 (2004). The amended regulations further provide that the credit balance exemption applies in the following circumstances:

"(a) Pursuant to the reporting requirements detailed in [] G.L. c. 200A, §§ 5 and 7, an exemption shall exist...