Decision striking down Delaware's estimation method for auditing unclaimed property to stand as parties settle.

Author:Bazata, Bob

On Aug. 5, 2016, Delaware and the unclaimed property holder (holder) in Temple-Inland, Inc. v. Thomas Cook, Civ. No. 14-654-GMS (D. Del. 6/28/16), filed a joint motion to dismiss the case with prejudice, after reaching a settlement agreement. The voluntary settlement agreement "hilly and finally resolves all claims" in the case. Therefore, the case will not be appealed to the Third Circuit by the state, as was originally anticipated.


At the end of June, in a long-awaited and highly anticipated case, the U.S. District Court for the District of Delaware held that Delaware's executive action of auditing and assessing a multistate corporation's unclaimed property violated substantive due process because the state's action, when taken together, "shocks the conscience." Most notably, the court held that the state's use of the existence of unclaimed property in the base year to infer the existence of unclaimed property in the reach-back year without replicating the characteristics and qualities of the property within the sample creates significantly misleading results.



Although the terms are unknown, this settlement leaves in place the court's June riding. The court's assertion that Delaware's estimation process violates substantive due process creates a historic, landmark change in the unclaimed property environment, requiring immediate attention by the holder community.

Delaware's settlement of the suit without addressing the need for remedies proposed by the trial judge will create further uncertainty for holders as they consider critical issues that remain unanswered, such as:

* Formation of a reasonable estimation calculation;

* Appropriate lookback periods; and

* Record retention obligations.

It is anticipated that Delaware will communicate that the findings in the initial decision apply only to one holder's...

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