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Court Upholds Delaware’s Subpoena Power

Posted By Administration, Thursday, June 4, 2020

A May 21, 2020, Delaware Chancery Court opinion was a win for the state of Delaware in its ongoing battle with Univar Inc. Vice Chancellor Joseph R. Slights III denied a motion to dismiss from Univar, which argued that the state did not satisfy the statutory prerequisites to enforce a subpoena.

 

On Dec. 11, 2015, Delaware notified Univar it would be subject to an unclaimed property examination, conducted by Kelmar. Upon receiving document requests from Kelmar, Univar objected, citing confidentiality concerns, Kelmar’s self-interest, the estimation process and other aspects of the audit. According to Univar’s complaint, Delaware rejected or ignored the objections and continued to do so for more than two years.

 

On Oct. 30, 2018, the state issued a subpoena for the records Kelmar had previously requested. Univar declined to comply and filed a District Court action challenging the constitutionality of Delaware’s unclaimed property laws, updated in 2017 following the Temple-Inland decision. The state responded by filing a complaint in the Chancery Court, seeking an order enforcing the subpoena.

 

On September 17, 2019, the District Court ruled that many of Univar’s claims lacked “ripeness.” As such, she dismissed the majority of claims, keeping just two alive, pending a decision from the Chancery Court whether to enforce a Delaware subpoena.  

 

Univar’s motion to dismiss the Chancery Court case was based on two arguments:

  • Delaware had not adequately demonstrated its compliance with the unclaimed property law’s confidentiality provisions, a necessary prerequisite to any audit.
  • Delaware had not promulgated sufficient regulations to manage multistate audits fairly, as required by the law.

The court disagreed with both arguments.

 

Univar argued that the audit was a multistate audit, and that, because the public records laws of the other participating states conflict with the confidentiality requirements of the Delaware’s law, the action will not be ripe for decision until Delaware demonstrates its full compliance with its own confidentiality requirements. Delaware maintained that it was conducting a Delaware-only audit.

 

“There is no basis to conclude as a matter of undisputed fact that the state is conducting a multistate audit,” the court stated. “Even if the state were conducting a multistate audit, Kelmar is bound by Delaware law not to share any of Univar’s confidential information with ‘any person who is not a current officer or employee of [Delaware].’”

 

Regarding Univar’s second argument, the court wrote, “The state has written a number of rules and regulations pursuant to that statutory grant of rule-making authority… While Univar may not like the number or content of regulations that have been promulgated, that does not mean this case is unripe.”

 

In denying the motion to dismiss and determining that the state has the ability to enforce its subpoena, the District Court case that was put on hold pending this decision can proceed.

 

UPPO will continue to monitor and report on the progress of the Univar District Court case as noteworthy developments occur.  

 

 

Tags:  Delaware  litigation  Univar 

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