Federal District Court Holds Delaware’s Unclaimed Property Enforcement Practices “Shock the Conscience”
On 28 June 2016, a federal court gave a major victory to Temple-Inland Inc. in its dispute with Delaware, declaring some of the state's most egregious unclaimed property audit practices to be unconstitutional executive action. The court found that the state, and its contract auditors, waited more than two decades to perform an audit, ignored the applicable statute of limitations, failed to notify the company that records needed to be kept beyond standard retention periods, retroactively applied estimation authority solely to raise revenue, employed a faulty method of estimation, and subjected the company to multiple liability for the same unclaimed property. The court held these actions taken together "shock the conscience" and are due process violations.
This Client Alert provides a detailed analysis of the court's ruling, and highlights the impact this ruling may have on companies currently under audit, as well as those that have been previously audited or entered into voluntary disclosure agreements with the state.