Keane's Unclaimed Property Blog

Marathon Update: Third Circuit Reversal Means Another Win for Holders

On Monday, December 4, 2017, the United States Court of Appeals for the Third Circuit vacated the United States District Court of Delaware’s dismissal of the lawsuit filed by Marathon Petroleum.  In its precedential opinion, Marathon Petroleum Corp. et al., v. Secretary of Finance et al. [1], the Third Circuit rejected the holding that private parties cannot invoke federal common law to challenge a state’s abandoned property practices.

The Third Circuit agreed with the district court that Marathon’s challenge of the audit was ripe because it was ongoing, but found that the scope of the audit was not ripe, as Delaware had not yet taken formal steps to compel compliance in connection with the audit.  Moreover, the Third Circuit rejected the district court’s holding the priority rules only apply to conflicting claims between the states and not to disputes between private parties and a state.

Marathon had sued the state in 2016, after receiving a letter from Kelmar Associates, a third-party auditor for the state of Delaware, which threatened enforcement action against Marathon and Speedway if they failed to produce additional detailed financial documentation requested in connection with its examination of gift cards.  Marathon argued that, under the priority rules established in Texas v. New Jersey[2], even though the entities were incorporated in Delaware, the state lacked the authority to claim sums associated with its stored value cards because they were Ohio subsidiaries.

The district court dismissed the claim, finding that the priority rules only applied to conflicting claims between the states and not to disputes between private parties and a state.  The Third Circuit found that the claim was not ripe because the companies were not subject to current enforcement by Delaware.

With the reversal by the Third Circuit, holders are now afforded a platform in federal court by which unclaimed property disputes against a state can be heard.

Keane will continue to monitor any future activities pertaining to this litigation and provide updates here on our blog and in Keanotes, our unclaimed property compliance journal.


[1] No. 16-4011

[2] 379 U.S. 674 (1965)


Compliance


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