fbpx
News
April 20, 2015

Cracking Down on Delaware’s Unclaimed Property ‘Cash Grab’

The courts may be on the verge of significantly curtailing a controversial cash-grab program for the state of Delaware.

United States District Court Judge Sue Robinson is allowing a case brought by Temple-Inland, Inc., that challenges Delaware’s unclaimed property law to proceed through federal court. The law permits the state to seize “unclaimed purchases and assets” such as dormant bank accounts, un-cashed checks, and corporate gift certificates by requiring companies to turn those assets over to the state — or their equivalent value — if they can’t locate the actual owner.

Unclaimed property is big business for Delaware. Just this past year they took in $475 million, or about 14% of the state’s total revenue.

And while all states have unclaimed property laws on their books, Delaware is regarded as the most aggressive in enforcing it, often calling in auditors to maximize the payouts companies have to make — even allowing auditors to estimate how much unclaimed property a company would have even if it doesn’t have any records for it.

The impetus for the Temple-Inland suit was, according to the Wall Street Journal, “over what company executives said was an unfair $1.4 million assessment of un-cashed accounts payable and payroll checks between 1986 and 2008.”

In allowing this case to proceed, Judge Robinson found that Delaware had “violated Temple-Inland’s constitutional rights by subjecting the company to arbitrary actions, retroactively changing established rules and then levying fines based on the new definitions, as well as taking property without properly compensating the company.”

This case, along with others working their way through the courts, are an important signal that courts are reining in these kinds of unclaimed property abuses.

It should also serve as a signal to state legislatures and state unclaimed property administrators that they need to give serious consideration to best practices that afford more rationality and fairness when enforcing their states’ unclaimed property laws.

Please click here to view, “Unclaimed Property: Best Practices for State Administrators and the Use of Private Audit Firms,” released by ILR in April 2014.

calculator bankruptcy system Blog Protect the Integrity of the Bankruptcy System. Don’t Let Trial Lawyers Destroy It Other Issues Blog West Virginia Wants to Pay Jurors More---That’s a Good Thing Asbestos, Other Issues Podcasts Episode 23: Torts of The Future: Drones Class Action Litigation, Other Issues Press Releases US Chamber of Commerce Institute For Legal Reform Issues Statement on West Virginia Gov. Jim Justice’s Appointments to the Intermediate Court of Appeals Other Issues Podcasts EPISODE 21: Summit XXI: Litigation Line of Sight: Class and Mass Action Trends in Europe Class Action Litigation, Data Privacy, International Initiatives, Other Issues

Cookie Notice

By clicking “I Accept”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.

Cookie Notice

By clicking “I Accept”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. Review Settings