Source: https://www.uppo.org/blogpost/925381/Unclaimed-Property-Focus?tag=Plains+All+American
Timestamp: 2019-04-25 12:41:25+00:00

Document:
Univar Inc. v. Geisenberger, et al.
Delaware’s retroactive application of amendments to the Delaware Abandoned and Unclaimed Property Law (DUPL), amended on Feb. 2, 2017.
The state’s use of a third-party auditor that simultaneously represents other states in a multi-state audit.
The state’s contingent-fee arrangement with its third-party auditor.
On Dec. 11, 2015, Delaware notified Univar it would be subject to an unclaimed property examination, conducted by Kelmar. Upon receiving document requests from Kelmar, Univar objected, citing confidentiality concerns, Kelmar’s self-interest, the estimation process and other aspects of the audit. According to Univar’s complaint, Delaware rejected or ignored the objections and continued to do so for more than two years. On Oct. 30, 2018, the state issued a subpoena for the records Kelmar had previously requested.
The Univar case includes several issues that have been part of other recent cases, including Temple-Inland v. Cook, Plains All American v. Cook and Marathon Petroleum v. Cook. However, unlike those lawsuits, the Univarcase was filed after the February 2017 DUPL amendments and, thus, questions the state’s ability to retroactively apply those amendments to audits that were initiated earlier.
Univar also picks up the challenge to Delaware’s estimation methodology where Temple-Inland left off. The Temple-Inland court ruled that the state’s estimation methodology was unconstitutional. Univar argues that Delaware merely added a 10-year look-back period but otherwise continues to rely on estimation practices already declared invalid.
Delaware and Kelmar also allegedly responded to Temple-Inland by rescinding its requests to holders for prior unclaimed property filings for all states because the court took issue with the practice. However, after the case was settled, these requests were reinstated and the state incorporated the right to request such prior filings into the 2017 DUPL amendments.
One of the issues in the Univar case that was also a factor in other recent litigation is the concept of ripeness. The Plains All American case also questioned Delaware’s use of estimation. The court said Plains may have valid complaints, but because the state had not yet formally taken steps to request records or force Plains to comply with the audit, the case was not yet ripe.
Ultimately, a decision in the Univar case may provide clarity for unclaimed property holders regarding the state’s audit and estimation practices.
UPPO will continue to monitor and report on the progress of the Univarcase as noteworthy developments occur.
One of the more interesting recent unclaimed property cases in recent years is Plains All American Pipeline L.P. v. Thomas Cook et al. In August 2016, the case was dismissed, but Plains has appealed the decision, sending the case to the Third Circuit Court of Appeals.
A limited partnership incorporated in Delaware, Plains All American Pipeline, received notification in 2014 that Kelmar would be conducting an audit of the company on behalf of Delaware. Plains objected to the initial information request, claiming, in part, that the company was being audited not because of any suspicion of wrongdoing, but rather because of its profitability. When Delaware dismissed the company’s objections, Plains filed suit.
Among the complaint’s allegations, Plains argues that Kelmar’s request for information about subsidiaries organized outside of Delaware constitutes illegal search and seizure under the Fourth Amendment. The company argued that the state and its agent have no right to that information and, if they did, they would need to have reasonable grounds to search for it. The complaint also directly challenged Delaware’s right to use estimation.
On Aug. 16, 2016, the U.S. District Court for the District of Delaware granted the defendants’ motion to dismiss. In part, the court said the plaintiffs brought their suit based on potential threats and not actual threats. For example, Plains challenged the state’s right to use estimation before it had done so, as the lawsuit was brought immediately following Kelmar’s initial information request. Regarding the Fourth Amendment claim, the court said the state’s decision to examine businesses based on their profitability was legitimate, as those companies are logically more likely than others to hold large amounts of unclaimed property.
As with any case a court dismisses with prejudice, parties involved in the case may appeal the decision. Plains All American did just that on Sept. 16, 2016, sending the case to the Third Circuit Court of Appeals.
The appealed Plains case is developing at a time when Delaware’s unclaimed property practices face several significant challenges. These challenges may affect how the appeals court views the case.
Another case, Delaware Department of Finance v. Blackhawk Engagement Solutions, could also influence the outcome of Plains. In 2015, Delaware’s escheator issued a subpoena to Blackhawk requesting documents related to an audit that had been in progress for several years. Blackhawk refused. Delaware filed an action in court to enforce the subpoena, and Blackhawk resisted, claiming the escheator was not authorized to take these actions, among other things. The state filed a motion for judgment on the pleading, at which point Plains All American and Marathon filed a joint amicus brief.
The brief cites several areas of the Delaware Code where state agencies are authorized to conduct examinations to determine with a set of laws and expressly authorized to issue a summons for testimony and a subpoena for documents. The unclaimed property statute authorizes the escheator to issue a summons for testimony, but not a subpoena for documents. The amicus brief points out that the code actually included such authorization until it was repealed and revised in 1990.
In light of the important issues at play in Plains and other current cases, Green-Kelly offers some advice for holders undergoing an audit or considering entering into a voluntary disclosure agreement (VDA).

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