## Facts

- Foote’s Grocery, Inc. operated two grocery stores in Arkansas and held a favorable unemployment insurance “experience rating” with the Arkansas Employment Security Division (ESD), reducing its contribution rate.
- In 1971, the Crossett store was reorganized into a new corporation, Foote’s Dixie Dandy, Inc., while operations remained essentially the same (location, employees, and management).
- The governing statute required a written request to transfer the favorable experience rating from the old corporation to the new corporation.
- Foote’s accountant consulted an ESD field auditor (with whom Foote’s had routinely worked on unemployment contribution matters) about what was needed after the reorganization.
- Foote’s evidence showed the auditor advised that no special filing was necessary and that the account could be continued under the new name.
- Relying on that advice, Foote’s did not file the written transfer request in 1971.
- Years later, ESD concluded Foote’s should have been paying at a higher rate and sought to collect over $20,000 in additional contributions for the previous five years.
- Foote’s sued in chancery court to enjoin the collection; the chancellor ruled for the State and rejected both substantial-compliance and estoppel/waiver defenses.
- Foote’s appealed.

## Issues

1. Whether the State may be equitably estopped from collecting additional unemployment insurance contributions when the employer reasonably relied on erroneous advice from an ESD field auditor about filing requirements.
2. Whether Arkansas should retain a categorical rule that the State can never be estopped by acts of its agents.

## Decision

- The Arkansas Supreme Court reversed the chancery court and remanded.
- The court held the State may, in proper circumstances, be equitably estopped from enforcing a statutory requirement or collecting amounts otherwise due.
- The court abandoned the prior absolute rule that the State can never be estopped because of the acts of its agents.
- On the proof presented, estoppel could bar the State’s retroactive assessment where the employer sought guidance, relied on an official’s misstatement, and faced substantial detriment.

## Legal Principles

- Equitable estoppel may apply against the State when justice and fair dealing require it, though it must be applied cautiously.
- Estoppel may be warranted where a responsible government agent, acting within the scope of assigned duties, makes a representation on which a private party reasonably relies to its detriment.
- Applying estoppel in a particular case does not repeal or amend a statute; it may instead limit the government’s ability to enforce statutory consequences against a party misled by official conduct.
- Government use of compliance personnel to advise regulated parties can support the reasonableness of reliance on that advice in an estoppel analysis.

## Conclusion

The court held that Arkansas is not categorically immune from equitable estoppel and that, where an employer reasonably relied on erroneous guidance from an ESD auditor and would suffer substantial retroactive liability, the State may be estopped from collecting additional unemployment contributions; the case was reversed and remanded for further proceedings consistent with that rule.


Foote’s Dixie Dandy, Inc. v. McHenry, 607 S.W.2d 323 (Ark. 1980)