Keane's Unclaimed Property Blog

Delaware & Temple Inland Settle – File to Dismiss Litigation

Just a little over a month ago, the unclaimed property community was buzzing about a Federal District Court decision on summary judgment motions filed in the lawsuit called Temple Inland v. Cook1. In that decision, the Court ruled that Delaware unclaimed property audit practices with regard to its audit of Temple Inland, including its estimation calculation criteria, violated Temple Inland’s right substantive due process under the United States Constitution.

Specifically, the Court stated, ““To put it gently, defendants have engaged in a game of “gotcha” that shocks the conscience.”2 However, in its opinion, the Court intentionally did not specify a remedy for the constitutional violation. Instead, the Court directed Delaware to examine its audit practices and fashion an appropriate resolution.

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News of the decision put those involved with pending Delaware-related voluntary disclosure agreements and audits in a quandary as to the ultimate impact of the Court’s decision.  Cautiously optimistic that the opinion would have a positive impact for holders, the business community and their advocates awaited guidance regarding possible revisions to Delaware unclaimed property audit practices.

Settlement, Next Steps & Potential Impact

On August 5th, news spread that Temple Inland and the Defendants (officials of the Delaware Department of Finance and the State Escheator’s Office in their official capacities), had filed a joint motion to dismiss the case based on a recent voluntary settlement between the parties. Unfortunately, if the Court dismisses the case based upon the pending motion, then the Delaware State Escheator’s Office and the Delaware Secretary of State will have no incentive to revise their audit practices.  Nor will the other constitutional issues that were not decided by summary judgment be addressed.

The Court’s summary judgment opinion acknowledges the issues surrounding Delaware’s audit practices, which is a step in the right direction in alleviating the holders’ burden. However, the settlement curtails movement toward a permanent remedy.  Additional lawsuits may be necessary to cause meaningful reform with regard to Delaware’s audit estimation tactics. Aside from Delaware, some within the unclaimed property community also have  questioned the potential impact of the Temple Inland decision on examinations conducted by other states under the primary jurisdictional rule due to the Court’s statements that estimation may be appropriate in such examinations.

As more information is forthcoming, Keane will provide an update including details of the settlement if they are made public.

Go from Delaware & Temple Inland Settle – File to Dismiss Litigation back to the blog.

[1] Temple Inland, Inc. v. Cook, et. al, No. 14-654-GMS (USDC – Dist. of DE) Memorandum Opinion and Order (6/28/2016)

[2] Ibid., at p. 33.

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