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Litigation Update: AT&T, Siemens, Eaton and Fruit of the Loom Challenge Delaware’s Authority

Posted By Administration, Thursday, June 18, 2020

AT&T Capital Services, Inc. et al. v. Geisenberger, et al.

Siemens USA Holdings, Inc. v. Geisenberger et al.

Eaton Corporation et al. v. Geisenberger et al.

Fruit of the Loom, Inc. et al. v. Geisenberger et al.

 

Among the most noteworthy unclaimed property court cases currently in progress are separate lawsuits filed in December 2019 against the state of Delaware by AT&T Capital Services, Siemens USA Holdings, Eaton Corporation and Fruit of the Loom.

 

Although not identical, the cases have similarities. In all four cases, the companies had been undergoing an audit conducted by a third-party auditor for at least five years. The companies joined the state’s expedited audit program after Delaware passed S.B. 13, which – among other unclaimed property reforms – allowed companies under audit to request an expedited audit within 60 days after the escheator adopted new estimation regulations. As the 18-month expedited audit period ended, Delaware claimed the companies had not complied with its information requests for information about claims with addresses in states other than Delaware. The state then terminated the companies’ participation in the expedited audit program.

 

The plaintiff companies’ claims include:

 

Unreasonable search and seizure

  • Delaware is subpoenaing and demanding documents that are not legitimate exercises of authority, are too indefinite and not reasonable relevant. These include records regarding unclaimed property claims with addresses other than Delaware.

Procedural due process and equal protection

  • Delaware is using Kelmar, a self-interested, third-party auditor as an adjudicator.

Substantial due process, ex post facto clause, takings clause and federal common law

  • Delaware uses records requested from the companies to prepare ex post facto estimation of amounts owed.
  • Estimation conflicts with federal common law established in the Texas trilogy of cases by using information from states other than Delaware in violation of the supremacy and due process clauses, and represents unreasonable search and seizure.
  • Requests for transactions associated with non-Delaware addresses and termination from the expedited audit for not complying violate substantive due process as deliberate and arbitrary abuses of power.
  • Delaware demands documents it lacks authority to take in violation of the takings clause.
  • Many of the information requests are ex post facto because they penalize the failure to keep records companies were not previously obligated to keep until S.B. 13 was passed in 2017.

 

Delaware claims the federal cases are not yet ripe and should be dismissed. The state also claims the companies failed to state claims in part because Delaware interprets the federal common law from the Texas trilogy of cases differently.

 

In only the AT&T case, Delaware asked for the case to be stayed or the District Court to decline jurisdiction because of a pending state action regarding Delaware’s escheat laws and the state court needs the opportunity to address those issues before the federal court proceeds.

 

In December 2019, the companies filed suit alleging violations of constitutional and federal law. Delaware responded by filing suit in the Chancery Court only against AT&T, seeking enforcement of the administrative subpoena. In January 2020, Delaware filed motions to dismiss the federal cases, and the parties filed motions to keep the cases in federal court.

 

UPPO will continue to monitor and report on these cases as noteworthy developments occur.

 

 

Tags:  Delaware  litigation  unclaimed property 

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