Delaware Unclaimed Property

Federal District Court Holds Delaware’s Unclaimed Property Enforcement Practices “Shock the Conscience” 

On June 28, 2016, in Temple-Inland Inc. v. Cook, 1:14-cv-00654 (D. Del. filed May 21, 2014), the U.S. District Court for the District of Delaware handed TempleInland Inc. (“Temple-Inland”), the plaintiff, a major victory over the Delaware Department of Finance (the “Department”), the defendants, declaring some of the Department’s most egregious abandoned and unclaimed property practices to be unconstitutional executive action.

As the court succinctly explained:

In summary, defendants: (i) waited 22 years to audit plaintiff; (ii) exploited loopholes in the statute of limitations; (iii) never properly notified holders regarding the need to maintain unclaimed property records longer than is standard; (iv) failed to articulate any legitimate state interest in retroactively applying Section 1155 [the Delaware statute allowing estimated assessments of unclaimed property] except to raise revenue; (v) employed a method of estimation where characteristics that favored liability were replicated across the whole, but characteristics that reduced liability were ignored; and (vi) subjected plaintiff to multiple liability. To put the matter gently, defendants have engaged in a game of “gotcha” that shocks the conscience.

The court’s ruling provides many companies allegedly holding unclaimed property (referred to herein as “holders”), especially those incorporated in Delaware, with opportunities to challenge the Department’s enforcement practices. Holders currently under audit, and potentially holders that have been previously audited or entered into voluntary disclosure agreements with the state, should consult with counsel to evaluate the proper course of action in light of this favorable development.


Unclaimed property audit practices violated the Due Process Clause of the US Constitution