Temple-Inland Inc. v. Cook et al

Filing 130

MEMORANDUM OPINION. Signed by Judge Gregory M. Sleet on 6/28/2016. (mdb)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
TEMPLE-INLAND, INC.,

)
)
)
)

Plaintiff,
V.

)

THOMAS COOK, in his capacity as the
Secretary of Finance for the State of
Delaware; DAVID M. GREGOR, in his
capacity as the State Escheator of the State of
Delaware; and MICHELLE M. WHITAKER,
in her capacity as the Audit Manager for the
State of Delaware,

)
)
)
)
)
)
)

Civ. No. 14-654-GMS

Defendants.

Brian M. Rostocki, Esquire and John C. Cordrey, Esquire of Reed Smith LLP, Wilmington,
Delaware. Counsel for Plaintiff. Of Counsel: Diane Green-Kelly, Esquire of Reed Smith LLP,
Chicago, Illinois.
David J. Margules, Esquire of Ballard Spahr, Wilmington, Delaware. Counsel for Defendants.
Of Counsel: Edward K. Black, Esquire and Caroline Lee Cross, Esquire of Department of
Justice, Wilmington, Delaware, Steven S. Rosenthal, Esquire, Marc S. Cohen, Esquire, Tiffany
R. Moseley, Esquire, and John D. Taliaferro, Esquire of Loeb & Loeb LLP, Washington, D.C.

MEMORANDUM OPINION

Dated: June -2!(, 2016
Wilmington, Delaware

I.

INTRODUCTION

This dispute asks the court to determine the constitutional limits to Delaware's enforcement
of its unclaimed property laws. "Unclaimed" or "abandoned" property refers to any property held
by a business, where the business is not the owner of the property, and there has been no contact
with the owner for the "dormancy period." 12 Del. C. § 1198. Usually, unclaimed property is
money in the form of savings accounts, checking accounts, stocks, uncashed dividend or payroll
checks, traveler's checks, unredeemed money orders or gift certificates, life insurance policies, etc.
All fifty states, as well as the District of Columbia, have laws addressing how businesses
must handle unclaimed property. Under Delaware law, the business is called a "holder." 12 Del.
C. at § 1198(7). At the end of each year, holders must report and transfer (or "escheat") to the

state any property that has been abandoned as of the end of the prior year. 12 Del. C. § 1199.
Ownership of the funds does not transfer to the state. Instead, the state holds the abandoned
property in trust in perpetuity until claimed by the owner or the owner's successor in interest.
(A 742). Until the owner claims the property, a state can use the funds for the general welfare.
The defendants are employees of the state government authorized to enforce Delaware's
unclaimed property laws, 12 Del. C. §§ 1101, et seq. (the "UPL"). Plaintiff Temple-Inland Inc.
("plaintiff') is a Delaware corporation that manufactures corrugated packaging. (D.I. 113 at 2).
Its principal place of business is in Texas, and its operations are primarily in Texas, Indianapolis,
and Indiana. (Id. at 3). In 2008, defendants audited plaintiff for deficiencies in reporting and
escheating unclaimed property for the previous 22 year time period.
Plaintiff claims that defendants' audit violates certain provisions of the U.S. Constitution.
Presently before the court are the parties' cross-motions for summary judgment on plaintiffs

1

claims for violation of substantive due process, the takings clause, and the ex post facto clause.
Defendants have also asked the court to exercise its discretion in favor of abstention. (D.I. 112,
114). For the reasons set forth below, plaintiffs motion for summary judgment is granted-in-part
and denied-in-part, and the defendants' motion for summary

judgmen~

is denied-in-part and

granted-in-part.

II.

PROCEDURAL HISTORY
On May 21, 2014, plaintiff filed a complaint alleging violation of federal common law and

several provisions of the U.S Constitution. (D.I. 1). On July 22, 2014, plaintiff moved for
summary judgment on two of its six claims (violation of federal common law and ex post facto
clause). (D.I. 22). At the same time, defendants moved to dismiss the entire complaint for failure
to state a claim. (D.I. 24). The court granted defendants' motion to dismiss the federal common
law claim, and denied defendants' motion as to the rest of the claims. 1 (D.I. 38, 39). The court
also denied plaintiffs motion for summary judgment, finding that issues of fact remained
unresolved. (Id.). On December 3, 2015, plaintiff filed an amended complaint dropping its claims
based on the commerce clause and the full faith and credit clause. (D.I. 108). Thus, the only
remaining claims in this case are the ones currently before the court on the parties' cross-motions
for summary judgment.

In granting the motion to dismiss, the court found that Texas v. New Jersey, 379 U.S. 674
(1965) and its progeny did not apply to disputes between private parties and states. Accordingly,
plaintiff did not state a claim for violation of federal common law. A Delaware trial court has
since ruled that Texas v. New Jersey does apply to disputes between private parties and the states.
See Delaware v. Card Compliant LLC, C.A. No. Nl3C-06-289 PSS [CCLD] at 6, 21 (Del. Super.
Ct. Nov. 23, 2015).
2

III.

BACKGROUND
A.

Delaware's Dependence on Unclaimed Property Revenue

Three historical factors have made a significant contribution to why the parties find
themselves in this dispute: (i) Delaware's dependence on unclaimed property revenue; (ii) the U.S.
Supreme Court's priority rules for escheating unclaimed property; and (iii) Delaware's historically
lax enforcement of its unclaimed property laws. The court provides this additional background
for the purpose of placing this dispute in a broader context.
The state government has admitted that providing consumer protection is not its only goal
in administering unclaimed property. (A593). Unclaimed property is Delaware's third largest
revenue source, making it a "vital element" in the state's operating budget. (DEOOOOl 111). 2 The
difference between the amount collected by the state and the amount returned to owners shows
that a large percentage of unclaimed property revenue remains with the state. For example, in
2007, approximately $364.9 million in unclaimed property went to the state's general fund.
(A588). But, around that same time, no more than $20 million was returned to owners. 3 (A723).
The state government has also admitted that "[t]o the extent that future budget needs and
growth are dependent on [unclaimed property revenue], it, too, must grow." (DEOOOOll 11).
Delaware's approach to growing its unclaimed property revenue is significantly influenced by the
priority rules set forth by the U.S. Supreme Court. (A593). Since states can use unclaimed funds

2

Plaintiff submitted an appendix that included some, but not all, of the pages from the
following report: Dept. of Fin., Office of Mgmt. & Budget, Controller Gen. Office, Delaware's
General Fund Revenue Porfolio: a Report Submitted in Fulfillment ofSenate Joint Resolution No.
5 I 441h General Assembly (Feb. 2008). The court takes judicial notice of those pages omitted from
the
filing
with
the
court.
The
full
report
is
available
at
http://www.finance.delaware.gov/publications/GP2008.pdf.

3

In 2014, that number jumped to around $100 million, because Delaware's Department of
Finance "started doing a better job processing claims." (A651-52, A723).
3

for the general welfare, several states may make competing claims for the same property. But the
U.S. Supreme Court has held that the same unclaimed property "cannot constitutionally be
escheated by more than one State." Texas v. New Jersey, 379 U.S. 674, 678-79 (1965). To resolve
which state had priority, the U.S. Supreme Court established a set of rules under Texas v. New

Jersey, 379 U.S. 674 (1965) and its progeny, referred to as the "Texas cases." The "primary rule"
gives the first opportunity to escheat to the state of the owner's last known address as shown by
the holder's books and records. Delaware v. New York, 507 U.S. 490, 499-500 (1993). If the
primary rule fails because the holders' records disclose no address for an owner, the "secondary
rule" awards the right to escheat to the state in which the owner is incorporated. Id.
As defendants are aware, Delaware is legal home to a large share of the nation's
corporations.

(See A593 (recognizing Delaware's

"~que

circumstances")).

As a result,

Delaware "receives a large share of all owner/address unknown abandoned property" generated in
the United States. (A587). In fact, an estimated 90% of the unclaimed property collected by
Delaware is owner/address unknown property. (A595). Thus, it benefits Delaware ifthe holders'
records do not have an address for the owner. The state government has recognized that "improved
record keeping systems could reduce the level of owner unknown property," and, ifthat happened,
"Delaware could see its revenues reduced." (DEOOOOl 115).
Despite the state's dependence on unclaimed property revenue, it has historically been lax
in enforcing its unclaimed property laws. Delaware, like most states, has voluntary compliance
percentages in the single digits. (A645). Historically, Delaware has never received more than
14,000 unclaimed property reports a year, yet over 680,000 entities are incorporated in the state.

4

(A589, A692). Delaware has long known that holders' low level of compliance is not due to
"willful noncompliance," but a lack of awareness ofreporting obligations. 4 (A595 n. 3).
As a result, a "significant portion" of Delaware's unclaimed property revenue comes from
its enforcement activities. (A596, A646). But even this has not been particularly robust. Delaware
lacked a formal audit program for unclaimed property until 2001 and, as of 2008, that program
was still in its "infancy." (A588, A642). Delaware has a small staff dedicated specifically to
unclaimed property arid depends primarily on contractors to conduct its audits. (A640-4 l, A646).
Because Delaware has limited resources for its enforcement activities, it targets for auditing "large
companies" where "there is a greater chance of escheatable property being collected." (A655).
B.

The Audit

On December 22, 2008, plaintiff received notice that the defendants would be conducting
an audit to determine its compliance with the UPL. In the notice, the state's Audit Manager said,
"I'm sure all records are being retained u.nder standard retention policies," which defendants later
admitted is typically 7 years. (Al29, A275, A455). The notice also stated that unclaimed property
is to be reported to Delaware in accordance with the priority rules set forth in the Texas cases.
(A455). That same instruction is provided in every Delaware audit notice letter and every
Delaware Escheat Handbook. (D.I. 113 at 4)

4

Several factors have contributed to the underreporting by businesses. First, the UPL is
contained within Delaware's title governing decedents' estates and fiduciary relations, because the
modem practice of escheatment arose out oflaws addressing an intestate decedent's estate. (All).
In the mid-twentieth century, the escheat laws were expanded to include intangible personal
property held by businesses. (Id.). But businesses may not have known to look at the title
governing decedents' estates to become aware of their obligations. Second, Delaware advises
holders to not file a report if they have no unclaimed property, purportedly because the Division
of Revenue,''did not want to be flooded with a ton of $0 filings." (A382; A442; A654). Thus,
some percentage of businesses do not file a report because they have no unclaimed property. What
percentage remains unknown.
5

On behalf of defendants, a contract auditor named Kelmar Associates, LLC ("Kelmar")
audited two bank accounts from which plaintiff issued checks for accounts payable and payroll.
(A465). The audit covered a 22 year time period-January 1986 to December 2007. (A459). But
plaintiff was only able to produce complete records back to 2003 for accounts payable and 2004
for payroll. (D .I. 113 at 4 ). Plaintiff had disposed of older records in compliance with its retention
policy. (A260-63). Plaintiff also produced all unclaimed property reports it filed in Delaware
from 1998 to 2008, a couple of reports filed before 1998, and two audit reports by Texas, covering
1985 to 2005. (D.I. 113 at 4). For the several years in which plaintiff did not have complete
records, defendants estimated the amount of unclaimed property.

C.

Legislation Regarding the Use of Estimation

In 2010, the General Assembly amended 12 Del. C. § 1155 to provide that defendants can
use estimation in unclaimed property audits. That statute reads in pertinent part, with key language
highlighted:
Where the records of the holder available for the periods subject to this chapter
are insufficient to permit the preparation of a report, the State Escheator may
require the holder to report and pay to the State the amount of abandoned or
unclaimed property that should have been but was not reported that the State
Escheator reasonably estimates to be due and owing on the basis of any
available records of the holder or by any other reasonable method of estimation.
The only restriction that Section 1155 puts on the use of estimation is that it be reasonable.
Otherwise, defendants have discretion with how to employ estimation.
In 2001, the General Assembly considered, but did not enact, H.B. 617, which would have
authorized the use of estimation and establish a five-year document retention requirement for
unclaimed property records. With respect to estimation, Section 6(b) proposed that:
In conducting an examination under this chapter, extrapolation or any other
commercially recognized method of statistical sampling may be used if
employed in a neutral manner that may establish the existence or non-existence
6

or [sic] property subject to escheat and may otherwise be employed to the extent
agreed upon by the escheator and the holder.
(A624). Section 6(d) addressed record retention, stating that:
Any records required to be maintained by the person under this chapter may be
destroyed or otherwise disposed of five (5) years after the initial report is made,
unless any year so encompassed is then the subject of an audit or investigation.
(A624). Although the General Assembly eventually adopted a statute permitting the use of
estimation, it never adopted a record retention statute. 5 Delaware's Department of Finance has
also not promulgated any guidelines or requirements regarding record retention, relying instead on
"standard retention policies." (Al29, A275, A455).

D.

Defendants' Estimation Methodology

To help explain defendants' estimation methodology, examples are taken from the
accounts payable portion of Kelmar' s audit report for plaintiff. (A461-62). Kelmar calculated
plaintiffs net liability for each year it did not have records (i.e., the "reach-back years") by
multiplying plaintiffs "adjusted calendar sales" for that year by a "ratio estimator." The reachback years were 1986-2002 for accounts payable and 1986-2003 for payroll. Plaintiff was credited
any amounts it could prove it previously reported and paid for that calendar year (referred to as
"prior filings"). (D.I. 126 at 2).
Year

Calendar Sales

x

Ratio Estimator

-

Prior Filings

= Net Liability

1996

$ 3,393,349,653

x

0.00365273%

-

$ 843.02

= $ 123,106.94

1995

$ 3,424,050,000

x

0.00365273%

-

--

= $ 125,071.366

5

A question arises as to what role, if any, Delaware's concern about reduced revenue played
in its decision not to adopt a record retention statue. (See DEOOOO 1115 (noting that improved
record keeping could reduce revenue from unclaimed property)).
6

This example uses the numbers from Kelmar' s report, even though Kelmar' s calculations
of net liability for each year is actually a few cents higher than it should be. For example, $
3,424,050,000 x 0.00365273% equals$ 125,071.30, not$ 125,071.36, as Kelmar reports. (A462).
7

The ratio estimator is a fraction created from the information available in the years plaintiff
had records, i.e. the "base years." Here, the base years were 2003-2007 for accounts payable and
2004-2009 for payroll. A fraction is a numerator divided by a denominator. The numerator of the
ratio estimator is the estimated "base period liability." The denominator is plaintiffs adjusted
calendar sales during the base period. 7 Kelmar reduced the denominator to account for the growing
use of electronic payments utilizing Automated Clearing House ("ACH"). This adjustment was
based upon defendants' view that ACH payments were less likely to be unclaimed property. (D.I.
115 at 9). The reduced denominator resulted in a larger ratio estimator, and thus, a larger amount
of unclaimed property in the reach-back years.
Base Period

Base Period Liability

I

Calendar Sales

= Ratio Estimator

2003-2007

$ 503,190.20

I

$ 13,775,722,893

= 0.00365273%

The base period liability is the sum of: (i) all unclaimed property reported to any state, (ii)
any funds returned to the rightful owner not in the ordinary course of business, and (iii) any
amounts not remediated.
Base
Period

Prior Filed
DE

+ Prior Filed

20032007

$ 11,689.75

+ $ 345,975.54

Other States

+ Funds
Returned to
Owner

+ $ 4,335.19

+ Unremediated

=

Base Period
Liability

=

$ 503,190.20

Amount

+ $ 141,189.72

A check was considered returned not in the ordinary course if it was reissued and cashed
by the payee after the audit began. Although plaintiff had a policy and practice of sending out due
diligence letters to payees that had not cashed a check, Kelmar presumed that the checks would

7

The court has not been asked to determine ifthe formula used for estimation is reasonable.
But Kelmar' s use of "calendar sales" as the denominator does raise questions, because, as the state
acknowledged, "abandoned property has no pertinent link to the economy." (A42-43).
8

not have been replaced but for the audit. (A487-88). The parties dispute what caused the checks
to be reissued in these instances.
To determine the unremediated amount for the base period, Kelmar conducted a sampling
of aged checks. First, Kelmar identified all checks within the base years that had aged at least 90
days. (D.I. 113 at 5). Then, Kelmar excluded from this population any check already reported to
Delaware or another state as unclaimed property, because they were already counted in the base
period liability under "prior filed items." (D.I. 115-4 at 47). Kelmar also excluded any checks
with a value less than $20, because the low amounts were considered inconsequential. (Id. at 48;
A483).
- Prior Filed DE

Base
Period

Aged Items

20032007

$ 16, 795,492.44

- Prior Filed Other

=

Population to be
Sampled

=

$ 16,437,927.15

States

- $ 11,689.75

- $ 345,975.54

The population of checks to be sampled were separated into stratums defined by check
value. From each stratum, Kelmar randomly selected sample checks, except all of the checks were
selected from the stratum with the highest value. The selected checks comprised the sample set,
which was 217 accounts payable checks totaling $6,112,942.10 and 140 payroll checks totaling
$603,137.36. (A483, A490). The checks in the sample set were then researched for "remediation."
Stratum

Population to be Sampled

$20.01 - $200.00

$

115,154.43

$

3,153.67

$200.01 - $800.00

$

402,482.61

$

16,344.12

$800.01 - $3,000.00

$ 1,245,259.48

$

55,528.26

$3,000.01 - $10,000.00

$ 2,373,550.90

$

173,264.37

$ 3,710,182.47

$

622,718.72

$35,000.01 - $200,000.00

$ 6,091,071.55

$ 2,741,707.25

$200,000.01 - $400,000.00

$ 2,500,225,71

$ 2,500,225.71

Total

$ 16,437,927.15

$ 6,112,942.10

$10,000.01 - $35,000.00

,

9

Sample Set

An aged check was "remediated" when plaintiff was able to provide sufficient
documentation to show that the check was not unclaimed property, either because it had been
returned to the payee in the ordinary course of business or was not owed to anyone. (D.I. 115 at
8; A483). Of the sample set, plaintiff was unable to remediate four checks from accounts payable
totaling $4,508.73 and three checks from payroll totaling $805.90. (A483, A490). All of the
unremediated checks had an address, and only one payroll check, in the amount of $147.30, was
addressed to Delaware. (A483, A490). Kelmar used all of the unremediated checks in sample set
to estimate the total unremediated amount for the entire population of aged checks. 8 (D.I. 113 at
5).
Most notably, Kelmar's estimation methodology relies heavily on property escheatable
only to other states to increase the amount of unclaimed property owed to Delaware. Specifically,
Kelmar included in its base period liability both unclaimed property reported to other states and
unremediated checks with a known address that was not Delaware. A larger base period liability
leads to a larger ratio estimator, which leads to a larger amount of estimated unclaimed property
in the reach back years owed to Delaware. To illustrate the impact, the court calculates that if the
amounts prior filed to other states were removed from Kelmar's calculation of base period liability,
the ratio estimator would be 0.00114124%, not 0.00365273%. The lower ratio estimator would
result in a lower net liability. Even if, for purposes of symmetry, credits of prior filed amounts to

8

It is unclear exactly how this extrapolation was done as the unremediated checks
represented only 0.07% of the sample set for accounts payable (i.e., $4,508. 75 of $6, 112,942.10),
but Kelmar determined that 0.86% of all aged checks (i.e. $141,189.72 of $16,437,927.15) was
unremediated.

10

other states were removed from the calculation of net liability, plaintiffs liability for accounts
payable would still decrease from $1,176,767.77 to $330,252.89. 9

E.

Plaintiff's Protest

At the end of the audit, plaintiff was assessed a liability in the amount of $2,128,834.13,
comprised of $1,176,767.77 for accounts payable and $952,066.36 for payroll. (D.I. 115 at 9; D.I.
113 at 6-7). This means that plaintiff owed Delaware for each reach-back year an average of
$69,221.63 for accounts payable and $56,003.90 for payroll. By comparison, following is a chart
showing how much less plaintiff escheated to Delaware for the base years. Neither defendants nor
Kelmar suggested that plaintiffs reports during the base years were inaccurate. Indeed, the
estimation used during the audit assumes those numbers are accurate.
Base Period

2009
2008
2007
2006
2005
2004
2003

Delaware
Payroll

Other States
Payroll

Not a part of the base period

Delaware
Accounts
Payable

-

$ 5,190.64
$ 2,491.86
$ 4,007.25

$
$
$
$
$

36,411.53
6,201.89
47,064.92
128,451.28
127,845.92

$ 1,251.62
$ 105.77

Other States
Accounts Payable
577.68
$
1,767.35
$
$ 7,574.93
$ 16,765.19
$ 51,337.36
$ 36,429.37

Plaintiff protested the assessment through several levels of administrative appeal, as set
forth in 12 Del. C. §1156. (D.I. 115 at 9). Under the administrative appeals process, the holder
may first file a written protest with the state's Audit Manager. The Audit Manager is allowed to
consider only "those property types, amounts and issues related to the examination that are set out

9

Plaintiffs expert produced several excel spreadsheets illustrating how Kelmar's
calculations would change based on removing certain discrete inputs, but none illustrating this
overall point. (See A54-77). It is unknown how much further this number would decrease if the
unremediated checks with addresses in other states were also removed from Kelmar's calculations.
11

in the written protest of the holder." 12 Del. C. §1156(c). A holder may appeal the decision of
the Audit Manager to the Secretary of Finance, who must appoint an independent reviewer to
consider the appeal of the Audit Manager's findings and make a written report to the Secretary of
Finance. 12 Del. C. § 1156(f)-(g). Either the holder or the Secretary of Finance may, within 30
days after the Secretary of Finance mailed the independent reviewer's written determination to the
holder, appeal the independent reviewer's written determination to the Court of Chancery. 12 Del.

C. §1156(c).

"The Court's review shall be limited to whether the independent reviewer's

determination was supported by substantial evidence on the record." 12 Del. C. §11560).
Here, plaintiff protested to the Audit Manager several aspects of the audit, including the
use of estimation. (A4 78-571 ). The Audit Manager responded by directing plaintiffs attention to
Section 1155, and stating that defendants were "forced" to estimate plaintiffs unclaimed property
liability, because plaintiff "failed to maintain records sufficient 'to permit the preparation of a
report."' (D.I. 115-4 at 56 (quoting 12 Del. C. § 1155)).
Ultimately, the Audit Manager reduced the assessment by $95,435.39 because Kelmar had
double counted two sample checks. (D.I. 113 at 9). The independent reviewer further decreased
the assessment, because he considered Kelmar' s adjustment to plaintiffs calendar sales based on
the use of ACH payments to be unreasonable. (A-776-79). Specifically, the independent reviewer
increased the amount of calendar sales, which reduced the ratio estimator, and in turn, reduced the
assessment by almost a million dollars. (Id.). On April 22, 2014, the Secretary of Finance adopted
the opinion of the independent reviewer and declared that plaintiff owed the state $1,388,573.97
in unclaimed property. (A760). Plaintiff did not file an appeal in the Court of Chancery and
instead brought suit in this court challenging the constitutionality of defendants' actions.

12

IV.

STANDARD OF REVIEW
"The court shall grant summary judgment if the movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter oflaw." Fed. R.
Civ. P. 56(a). The moving party bears the burden of demonstrating the absence of a genuine issue
of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 415 U.S. 574, 586 (1986). A
party asserting that a fact cannot be-or, alternatively, is-genuinely disputed must support the
assertion either by citing to "particular parts of materials in the record," or by "showing that the
materials cited do not establish the absence or presence of a genuine dispute, or that an adverse
party cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c).
If the moving party has carried its burden, the nonmovant must then come forward with

"specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). A factual
dispute is genuine where "the evidence is such that a reasonable jury could return a verdict for the
nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The standard does
not change merely because there are cross-motions for summary judgment. Appelmans v. Phila.,
826 F.2d 214, 216 (3d Cir. 1987); Krupa v. New Castle Cty., 732 F.Supp. 497, 505 (D. Del. 1990)
("The filing of cross-motions for summary judgment does not require the court to grant summary
judgment for either party.").

V.

DISCUSSION
Plaintiff has asked the court to grant summary judgment in its favor on its claims that

. defendants' actions violated substantive due process, the takings clause, and the ex post facto
clause of the U.S. Constitution. Defendants have asked the court to instead grant summary
judgment in their favor or abstain based on the doctrine set forth in Railroad Commission of Texas
v. Pullman Co., 312 U.S. 496 (1941). (D.I. 115 at 34-35). It is surprising that defendants ask for

13

abstention now after almost two years of active litigation. Nothing prevented defendants from
raising this request during the previous motion for summary judgment or motion to dismiss.
Regardless, before addressing the merits of plaintiff's claims, the court will explain why Pullman
abstention is not warranted.
A.

Abstention

Defendants have asked the court to abstain under Pullman until a state court has the
opportunity to interpret Section 1155, Which they claim is an ambiguous statute. (D.I. 115 at 3435). Pullman abstention is an "extraordinary and narrow exception" to a court's duty to adjudicate
a controversy properly before it. Planned Parenthood of Cent. NJ v. Farmer, 220 F.3d 127, 149
(3d Cir. 2000) (quoting Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 813
(1976)). Pullman abstention is limited to those exceptional circumstances where construction of
an ambiguous state statute by a state court could avoid or modify the federal question. Zwick/er

v. Koota, 389 U.S. 241, 248-49 (1967); Farmer, 220 F.3d at 150. Pullman abstention does not
apply "if the state law is clear on its face, or if its meaning has already been authoritatively decided
by the state courts, or if the constitutional issue would not be avoided or changed no matter how
the statute is construed." C. Wright, Law of Federal Courts at 304 (1983). The fact that a statute
has never been interpreted by a state court does not, by itself, compel abstention. Farmer, 220
F. 3d at 150; Harman v. Forssenius, 380 U.S. 528, 535 (1965). Both parties gave the issue of

Pullman abstention only a cursory treatment. Nevertheless, the court's analysis of the doctrine as
applied to this case leads it to conclude that Pullman abstention is not appropriate here. IO

As part of their argument for Pullman abstention, defendants raise the fact that plaintiff
could have appealed directly to the Court of Chancery for a review of the reasonableness of the
estimation. (D.I. 115 at 34). This fact, however, is not relevant to determining whether to abstain
under Pullman. It might have been relevant to an analysis of whether abstention was warranted
under Burford v. Sun Oil Co., 319 U.S. 315 (1943), which arises when federal lawsuits would
IO

14

In understanding when Pullman abstention is appropriate, the court finds helpful Smolow
v. Hafer, 353 F.Supp.2d 561 (E.D. Pa. 2005). In that case, plaintiff owned 300 shares of common
stock that were canceled and delivered to Pennsylvania's state treasurer, under the mistaken belief
it was unclaimed property. Id. at 565. The treasurer converted the stock to cash, which then earned
interest. Id. Upon plaintiffs request, the treasurer returned the amount received from the stock
sale but, pursuant to his interpretation of a Pennsylvania unclaimed property statute, refused to
transfer the interest. Id. No state court had construed the applicable statute. I I Id. at 572. When
the plaintiff sued in federal court, the federal court abstained under Pullman because the statute
was unclear and susceptible to an interpretation by a state court that could narrow or eliminate the
federal constitutional question. If a state court construed the statute to mean that interest followed
the principal, then the treasurer violated the statute, and the federal constitutional issue would
never be reached. Id. at 574.
Here, in contrast, the statute is not ambiguous. Section 1155 clearly provides that the State
Escheator has the authority to require a holder to pay the amount the State Escheator "reasonably

unduly disrupt state administrative efforts to establish a coherent policy with respect to a matter of
substantial public concern. Riley v. Simmons, 45 F.3d 764, 771 (3d Cir. 1995). But, defendants
did not identify or argue Burford, and the court is aware of no obligation to raise and resolve issues
of Burford abstention sua sponte. Even ifthe court was obligated to consider the issue on its own,
several facts raise doubts that it is appropriate here. For example, Burford requires timely and
adequate state law review to be available. Id. But the deadline for filing an appeal with the Court
of Chancery expired almost two years ago, in May 2014. See 12 Del. C. § 11560) (requiring
appeal to be filed in 30 days). It is also unclear whether the Court of Chancery has authority to
consider plaintiffs federal constitutional challenges when Section 1156 expressly limits the
court's review "to whether the independent reviewer's determination was supported by substantial
evidence on the record." Id. No Delaware case has construed the scope of the court's authority
under Section 1156, perhaps because no parties have yet availed themselves of the process. None
of this, of course, forecloses the possibility that defendants may persuasively argue for Burford
abstention in future cases.
II
The applicable statute read: "When property is paid or delivered to the State Treasurer
under this article, the owner is entitled to receive income or other increments actually received by
the State Treasurer." Smolow, 353 F.Supp.2d at 565 n.1.

15

estimates" to be due and owing. The fact that the statute does not require the State Escheator to
precisely determine the amount due, but instead permits him to "reasonably estimate" the sum,
does not render it ambiguous. See Ky. W. Va. Gas Co. v. Pa. Pub. Util. Comm 'n, 791 F.2d 1111,
1112 & 1118 (3d Cir. 1986) (finding no ambiguity under Pullman abstention where statute
required commission to determine whether proposed rates were "just and reasonable"); All. of
Auto. Mfrs., Inc. v. Currey, 984 F.Supp.2d 32, 51 (D. Conn. 2013) (declining Pullman abstention

where statute required manufacturers to give dealers "fair and reasonable" compensation because
"terms like 'fair' and 'reasonable' may be 'inherently flexible,' but they 'are not inherently
ambiguous"'). Because Section 1155 is unambiguous, there is no need for the court to exercise
Pullman abstention in this case.

B.

Substantive Due Process

The Due Process Clause provides that no state shall "deprive any person of life, liberty, or
property, without due process of law." U.S. Const. amend. XIV, § 1. The core concept of due
process is protection against "arbitrary" government action. Sacramento v. Lewis, 523 U.S. 833,
845 (1998). The criteria for determining what is fatally arbitrary depends on whether the plaintiff
is challenging a legislative enactment or executive action. Id. at 846. A legislative enactment is
subject to rational basis review, meaning the statute will withstand a substantive due process
challenge if the state "identifies a legitimate state interest that the legislature could rationally
conclude was served by the statute." Nicholas v. Pa. State Univ., 227 F.3d 133, 139 (3d Cir. 2000).
Here, however, plaintiff is challenging executive action, specifically, defendants' audit and
assessment of plaintiffs unclaimed property liability. Executive action violates substantive due
process protections "only when it shocks the conscience," the meaning of which varies depending

16

on the factual context. Ecotone Farm LLC v. Ward, 2016 WL 335837, at *5 (3d Cir. Jan. 28, 2016)
(quoting United Artists Theatre Cir., Inc. v. Warrington, 316 F.3d 392 (3d Cir. 2003)).
There appears to be no precedent in this or any other court addressing whether a state's
executive action with respect to unclaimed property shocks the conscience. The parties cited none
and the court did not find any. This is unsurprising because most "shock the conscience" cases
involve claims of excessive force or physical brutality. Sergio v. Doe, 769 F. Supp. 164, 167 (E.D.
Pa. 1991 ). The Third Circuit has not, however, limited the "shocks the conscience" standard to
substantive due process claims based on physical harm. See Bridges ex rel. D.B. v. Scranton Sch.
Dist., 2016 WL 953003, at *5 (3d Cir. Mar. 14, 2016) (stating that non-physical types of

harassment are subject to the shocks the conscience analysis); see also, e.g., Ecotone Farm LLC,
2016 WL 335837, at *5 (applying shocks the conscience standard to claim that government
officials interfered with plaintiffs use and enjoyment ofland); Kimbleton v. White, 608 F. App'x
117, i-19 (3d Cir. 2015) (applying shocks the conscience standard to claim that government
improperly suspended plaintiffs brokerage license). But, due to the unique nature of unclaimed
property, the cases not involving physical harm do not provide any useful analogies to the
unclaimed property context.
Despite the lack of clear precedent, the court finds several aspects of defendants' actions
troubling. As discussed in more detail below, defendants waited 22 years to conduct an audit,
avoided the otherwise applicable 6 year statute of limitations under .dubious circumstances, gave
holders no notice that they would need to retain unclaimed property records to defend against
unmeritorious audits, applied Section 1155 for a prolonged retroactive period for no obvious
purpose other than to raise revenue, and failed to follow the fundamental principle of estimation
where the characteristics of the sample set are extrapolated across the whole, which also puts

17

plaintiff at risk of multiple liability. The parties did not necessarily address all of these issues, and
for the ones they did address, chose to argue whether each one was an independent violation of .
substantive due process. Lacking clear precedent, the court finds no need to determine if any of
these actions on their own shock the conscience. It is sufficient that, in combination, defendants'
executive actions shock the conscience.
1.

Statute of Limitations

The statute of limitations is a critical issue. It explains why defendants are allowed to
assess a liability against plaintiff for something that happened 22 years ago. 12 Delaware' statute
of limitations for state action against holders is set forth in 12 Del. C. § 1158. Section 1158
provides, in relevant part, that:
(a) The State Escheator, as soon as is practicable after receipt of any report
required by this chapter, shall examine it to determine if it is correct. If the
Escheator finds that the report is not correct, the Escheator shall notify the holder
in writing by certified or registered mail of the amount of any underreported
abandoned or unclaimed property due and owing. Notice of the proposed
deficiency in payment shall be mailed to the holder within 3 years from the date
the report was filed ..... No suit to enforce the payment of a deficiency in
payment of abandoned or unclaimed property shall be brought under § 115 6 of
this title against a holder unless the notice of deficiency in payment is mailed to
the holder within the 3-year period provided in this subsection. In the case of an
omission of abandoned or unclaimed property from a report having a value in
excess of 25% of the amount of abandoned or unclaimed property disclosed in
a report, a notice of deficiency in payment may be mailed to the holder within 6
years from the date the report was filed.

12

Both parties relegated the issue of !aches to a few footnotes, with plaintiff identifying only
one case, from Pennsylvania, finding that !aches applied to the government. (See D.I. 113 at 22 n.
35; D.I. 119 at 15 n. 18; D.I. 121 at 29 n. 14). The court, however, found Delaware cases
recognizing that !aches may apply to the state government. See State ex rel. Brady v. Pettinaro
Enter., 870 A.2d 513, 528 n. 32 (Del. Ch. 2005) (stating that "[t]he use oflaches against the State,
while raising unique considerations, is not unprecedented," and providing examples). Because
plaintiff did not seriously pursue any !aches argument, the court will assume that the unique
circumstances warranting application of !aches against the state are not present here. This does
not foreclose the possibility that another plaintiff may persuasively argue a !aches defense in future
cases.
18

(b) If no report is filed, or if a false or fraudulent report is filed with the intent
to evade the obligation to pay over abandoned property, a notice of deficiency
in payment may be mailed to the holder at any time.
12 Del. C. § 1158(a)&(b). Accordingly, the State Escheator normally has three years from the
date a report is filed to bring an action to enforce payment of a deficiency. Id. If the deficiency is
greater than 25% of the amount of abandoned property disclosed in a report, the State Escheator
has six years, instead of three, to bring an action. 12 Del. C. § 1158(a). Finally, the State Escheator
can bring an action "at any time" if no report is filed, or if a false or fraudulent report is filed with
the intent to evade the obligation to pay over abandoned property. 13 12 Del. C. § 1158(b).
The governing statute oflimitations is not, as defendants have repeatedly asserted, set forth
in 12 Del. C. § 1202. (D.I. 115 at 1, 17). Section 1202 is labeled "Periods oflimitations not a bar"
and provides that:
The expiration of any period of time specified by statute or court order, during
which an action or proceeding may be commenced or enforced to obtain
payment of a claim for money or recovery of property, shall not prevent the
money or property from being deemed abandoned property nor affect any duty
to file a report required by this subchapter or to pay or deliver abandoned
property to the State Escheator.
12 Del. C. § 1202. Accordingly, even when an owner's claim against a holder is barred by a statute
of limitations applicable to the dispute between the owner and holder, the holder is not relieved of
its obligation to escheat the abandoned property to the state.
Section 1202 does not address the time period in which the state must bring an action
against a holder to enforce a deficiency payment. To the contrary, Section 1202 is designed to

13

In July 2015, the General Assembly adopted a series of amendments to Section 1155
phasing in how far back defendants' audit can reach when not limited by the statute oflimitations.
See S.B. 141, 148th Gen. Assembly (2015). Effective January 1, 2017, the State Escheator cannot
seek a deficiency payment for any transaction that is more than 22 years old. 12 Del. C. § 1155(e).
Because these amendments were adopted after plaintiff initiated this action, they are not applicable
to this case. Nevertheless, the amendments would have had no impact, because, conveniently,
defendants' audit of plaintiff reached back only 22 years.
19

prevent the holder from taking ownership of unclaimed property rather than escheating it to the
state. Put simply, Section 1202's purpose is to prevent private escheat, whereby the holder rather
than the state would enjoy the benefit of unclaimed property that could not be recovered by the
owner. See People ex rel. Callahan v. Marshall Field & Co., 404 N.E.2d 368, 374 (1980); Staples,
Inc. v. Cook, 35 A.3d 421, 424 (Del. Ch. 2012); Benson v. Simon Prop. Grp., Inc., 642 S.E.2d 687,

691 (2007); Unif. Unclaimed Prop. Act§ 19 cmt. (1995).
Here, defendants seek a deficiency payment for each year from 1986 to 2002. All of those
years are more than 6 years past the date a report was or should have been filed. Thus, defendants
must show they fit within the "at any time" exception of Section 1158. Defendants do not claim
that plaintiff filed false or fraudulent reports. Instead, defendants have assumed that plaintiff had
unclaimed property, but filed no report. 14 This, of course, ignores two other equally plausible
explanations for why the reports could not be found, each of which would bar defendants' action.
First, it is possible that plaintiff had no unclaimed property, and per the defendants'
guidance, did not file a report. Defendants have consistently advised holders that only financial
institutions have to file a negative report. (A382; A442). A negative report means the holder has
no unclaimed property. When no negative report is filed, the statute oflimitations never begins to
run against defendants. The defendants have not warned holders of these consequences.
Second, it is possible that plaintiff did in fact file a report, but it cannot be proven because
the copies were lost or destroyed.

In compliance with its record retention policy, plaintiff

destroyed most of its unclaimed property reports after 10 years. (A262). For reasons that are not
explained, it appears that defendants have likewise not kept copies of all the unclaimed property

14

Plaintiff was able to reproduce the unclaimed property reports it filed in 1996, 1998, and
1999. (A462). Defendants assessed a liability for those years. It is not clear why a liability for
those years is not barred by the statute of limitations.
20

reports filed with the state. (A938

,-r~

5-7). Nevertheless, defendants have put the burden on

plaintiff, not the state, to show that the reports were filed, so only holders, not the state, suffer
negative consequences from the failure to keep all reports. Plaintiff has not raised an argument as
to who should have the burden of showing that no reports were filed. But if the burden is properly
on plaintiff, defendants have also not warned holders of the consequences from the failure to keep
all of their unclaimed property reports for an unlimited period of time.
Given the fact that plaintiff was able to reproduce three reports from before 2002, and a
report from every year within its record retention policy, it seems likely that plaintiff filed reports
that are now missing. (A462). Thus, it is troubling that defendants' ability to seek a deficiency
that is more than six years old depends on accepting only one explanation for why reports cannot
be found (i.e., that plaintiff had unclaimed property and did not file a report). It is also troubling
that defendants' ability to advance this irrebuttable presumption is benefited by several of
defendants' own actions, including telling holders they do not need to file negative reports, not
telling holders they need to retain all of their unclaimed property reports, putting the burden on
plaintiff to show they in fact filed reports with the state, and not keeping copies of all unclaimed
property reports filed with the state.

2.

Notice

Plaintiff argues that it had no notice that estimation would be used in the audit. (See D.I.
113 at 29-33). Although it is doubtful that plaintiff had notice that estimation would be used, this
misses the point as to what type of notice would have actually benefitted holders and mitigated
any constitutional concerns. An auditor's estimation depends entirely on the information available
or not available from the holders' records. Any disputes about how the estimation was conducted
would ultimately have to consider whether the estimation reasonably reflected what was or should

21

have been in the holders' records. Thus, whether plaintiff had notice that estimation, in a general
sense, would be used is not as important as notice that plaintiff would be left with few means to
defend against overreaching in an unclaimed property audit unless it retained all of its records
forever.
Here, defendants never gave any notice that holders would need to retain records related to
unclaimed property. Through its own research, the court has determined that when defendants
sent their audit notice to plaintiff in December 2008, Delaware was one of only four states that had
not adopted a record retention statute for unclaimed property records. (See Appendix A attached
hereto). Forty-three states had adopted a record retention statute and an additional three states had
a statute of limitations for state actions against the holder that effectively operated like a record
retention statute, because it had no open ended exception like Delaware. (Id.). Accordingly, fortysix states expressly set a clear and finite number of years for which holders had to retain unclaimed
property records.

Of those forty-six states, forty-two required that records be maintained

somewhere between 5 and 10 years. (Id.). Of the four outliers, no state required more than 15
years and a few states required as little as 3 or 4 years. (Id.). For the two states that required 15
years, the statutes had been on the books since at least 1982. (Id.). In fact, a significant majority
of the states enacted record retention statutes before the tum of this century.
In spite of Delaware's decision to march to the beat of a different drummer, defendants
express surprise that plaintiff took a "calculated risk" of failing to anticipate an audit covering 22
years. (D.I. 115 at 17-18). The court cannot help but wonder at Delaware's sense of cadence. As
defendants admit, and academics agree, corporations do not normally retain records for longer than
7 years unless there is an identifiable need. (See A129 (State Escheator agreeing that companies
typically have document retention policies of seven years); A275 (Delaware's Audit Manager

22

stating that the standard retention policy for companies is seven years); D.I. 115-5 at 34 (treatise
stating that "[m]ost institutions do not maintain all of their records intact for periods in excess of
six or seven years")).
Defendants claim that they were not constitutionally required to give notice that holders
should retain records. (D.I. 115 at 21). But courts have relied on the existence of a record retention
statute to conclude that a state has not unconstitutionally shifted the burden of proof. Plaintiff
argues that defendants have the burden of proving that the property is, in fact, unclaimed before
they can seek a deficiency payment, and estimation does not meet that burden. (DJ. 119 at 15,
25). It is true that, "[u]nlike taxation (where a state holds direct legal authority to collect, retain,
and spend tax revenue for purposes of funding governmental operations), a state's authority to
receive and retain unclaimed property is derived from the owner's rights in that property."
Houghton, et al., Unclaimed Property, 74-3rd C.P.S. (BNA 2014) (A812). Consistent with the
principle that states have no greater rights than the owner, the U.S. Supreme Court has stated that
the first step in determining which state may escheat unclaimed property is determining the precise
relationship between the holder and owner. 15 Delaware, 507 U.S. at 499.

Thus, it seems

appropriate that defendants have the burden of proving that the property is in fact unclaimed. The
court does not, however, agree with plaintiff that estimation could never meet this burden.
In Illinois Physicians Union v. Miller, the government sought to recoup from plaintiffphysician excess compensation the government paid plaintiff under Medicare due to improper
billing practices, and used estimation to calculate the amount of overpayment. 675 F.2d 151, 153
(7th Cir. 1982). The Seventh Circuit rejected plaintiffs argument, similar to the one made here,

15

In Delaware, the U.S. Supreme Court used the terms "debtor" and "creditor" in place of
"holder" and "owner." Delaware, 507 U.S. at 499.
23

that the government improperly shifted the burden of proof regarding the existence of
overpayments to plaintiff by using estimation. Id. at 154. The court explained that the government
satisfied its burden by relying on a rebuttable, as opposed to irrebuttable, presumption that the
estimated amounts were overpayments. Id. The presumption could be rebutted because, as the
court noted, physicians were statutorily required to keep the records necessary to fully disclose the
extent of the services for which Medicaid reimbursement was sought. Id.
Other courts approving the government's use of sampling, extrapolation, or estimation
have similarly required that the plaintiff have an opportunity to rebut the estimation. See, e.g.,
Ratanasenv. Cal. Dep'tofHealthServs., 11F.3d1467, 1471 (9thCir.1993). That opportunity is
most readily provided where parties have notice that they should retain the records that the
estimation is designed to represent. It seems the Delaware General Assembly was aware of the
interdependent relationship between estimation and record retention when it initially considered
adopting an estimation statute in 2001. In that same bill, the Delaware General Assembly also
considered adopting a statute that holders should retain records for 5 years. (A621-24).
Finally, defendants' reliance on Riggs National Bank is misplaced, because it does not
support their proposition that the state is "not constitutionally required to give notice of the method
it will use to calculate a civil liability that is already on the books." (D.I. 115 at 21 ). In Riggs, the
District of Columbia enacted a statute in March 1981 mandating that holders report and deliver
abandoned property to the district. Riggs Nat'! Bank v. Dist. Of Columbia, 581A.2d1229, 1233
(D.C. App. 1990). The statute applied retroactively to all property which would have been
presumed abandoned ifthe law had been in effect as of January 1, 1980, i.e., over a year earlier.
Id. at 1234. The district picked this date precisely because "it approximates a time when the public
was put on notice that the government was contemplating recouping unclaimed property." Id. at

24

1234 n. 9 (emphasis added).

This is exactly the opposite of what defendants claim Riggs

represents.
3.

Retro activity

Plaintiff argues that defendants' retroactive application of Section 1155 for a period of
twenty-two years violates substantive due process.

(D.I. 126 at 8).

Defendants argue that

retroactivity is not an issue in this case because they are not relying on Section 1155 as the source
of their authority to estimate. (D.I. 127 at 5-6; Tr. 57).

It is difficult to comprehend how

defendants can argue that they are not relying on Section 1155 when the Audit Manager
specifically told plaintiff that Section 1155 authorized defendants' use of estimation in plaintiffs
unclaimed property audit. (D.I. 115-4 at 56). Moreover, what would have been the point of
enacting Section 1155 if not to give defendants' actions the cover oflegitimacy? It would certainly
make defendants actions appear even more arbitrary if they did not have a statute authorizing an
estimation that can reach back twenty-two years.

Defendants cannot evade the issue of

retroactivity by claiming that they did not rely on Section 1155, and the court does not believe it a
productive exercise to delve into the defendants' subjective intent to determine when they are, or
are not, relying on statutes that authorize their actions. 16
Since the court has concluded that retroactivity is, indeed, an issue in the case, it turns now
to plaintiffs argument that defendants' prolonged retroactive application of Section 1155 violated

16

Defendants also claim that they are not applying Section 1155 retroactively, because
holders have been required to deliver unclaimed property to the state since 1971. (D.I. 115 at 1718; D.I. 127 at 6). This argument fails because the Supreme Court has recognized that amendments
increasing monetary liability for same conduct operate retroactively. See, e.g., Hughes Aircraft
Co. v. US. ex rel. Schumer, 520 U.S.· 939, 947 (1997) (finding that an amendment increasing
monetary liability, but not altering the normative scope of unlawful activity, was retroactive);
Rivers v. Roadway Express, Inc., 511 U.S. 298, 303 (1994) (holding that an increase in monetary
liability is retroactive even though the normative scope of law was not altered). Section 1155
increases monetary liability for the same conduct and, therefore, it operates retroactively.
25

substantive due process. (D.I. 119 at 23). One complicating factor is that courts typically use
rational basis review to determine whether retroactivity violates substantive due process, because
the statute itself sets forth how far back it applies. Here, however, defendants-not Section 1155set the length of the retroactive period. Accordingly, the court must consider whether defendants'
actions "shock the conscience," not whether the General Assembly could rationally conclude that
enacting Section 1155 served a legitimate state interest. The court, nevertheless, relies upon cases
addressing retroactive legislation to help inform its own decision.
Plaintiff suggests that the sheer length of the retroactive period is a violation of substantive
due process. But the length of the retroactive period does not, by itself, establish a violation of
substantive due process. 17 See Davon, Inc. v. Shala/a, 75 F.3d 1114, 1126 (7th Cir. 1996) (finding
no support for the proposition that a statute necessarily violates due process if it is retroactive for
an unprecedented length of time); In re Chateaugay Corp., 53 F.3d 478, 491 (2d Cir. 1995) ("The
proposition that the Due Process Clause imposes a time limit on a law's retrospective effect elicits
no support from the case law .... "). Instead, it appears that the court must consider whether the
length of the retroactive period is appropriate given the reason why it is being applied retroactively.
Here, defendants' purported reasons for applying Section 1155 retroactively do not
withstand scrutiny. Defendants are correct that retroactive legislation shifting the benefits and
burdens of economic life between different public constituencies is "presumptively
constitutional." Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15 (1976). But, defendants'

17

To illustrate.this point, consider the fact that courts have upheld, in the face of substantive
due process challenges, the unlimited retroactive application of the Comprehensive Environmental
Response Compensation and Liability Act. See, e.g., United States v. Monsanto Co., 858 F.2d
160, 173-74 (4th Cir.1988).
26

audit of plaintiff did not shift the benefits and burdens of economic life between different public
constituencies. A survey of cases upholding "burden shifting" legislation helps illustrate the point.
In each of these cases, the statutes imposed liability on companies for harm they caused in
the past, and profited from, which affected innocent parties who might not otherwise have the
financial means to rectify that harm. See, e.g., Turner Elkhorn, 428 U.S. at 6-8 (requiring coal
mine operators to pay health benefits to coal miners suffering from black lung disease); Pension

Ben. Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 731-32 (1984) (ensuring that employers fully
funded pensions so that employees were not deprived of anticipated retirement benefits);

Commonwealth Edison Co. v. United States, 271 F.3d 1327, 1329-30 (Fed. Cir. 2001) (raising
funds from utilities to decontaminate and decommission government facilities used to enrich
uranium that utilities used to sell energy to customers). Defendants cannot show a similar one-toone shift between the burden on plaintiff and the benefit to owners of unclaimed property. 18
Defendants may collect a greater amount of money through their application of Section 1155, but
owners are not entitled to share in that increase. Instead, the amount of unclaimed property an
owner can collect remains unchanged, because they are entitled to only the amount they
abandoned. No more; no less.
Similarly, defendants' actions do not reinforce the viability of the state's unclaimed
property program. An animating concern behind the Supreme Court cases upholding "burden
shifting" legislation is that the administrative programs were experiencing a financial shortfall that
could have jeopardized the viability of the program. See, e.g., Turner Elkhorn, 428 U.S. at 8

18

Owners are the appropriate public constituency to consider in a burden shifting analysis.
The public is not the appropriate constituency, because then the state would be raising revenue for
the general welfare, which is essentially how a tax operates. Although the state can use unclaimed
property for the general welfare, unclaimed property is not to be treated like a tax. Defendants
admit that "[a]bandoned property is not a tax." (A588).
27

(enacting legislation to address "the insufficiency of state compensation programs" for black lung
disease); Pension Ben. Guar. Corp., 467 U.S. at 731-32 (acting to address concern that a significant
number of pension plans were "experiencing extreme :financial hardship"). Here, owners are not
at risk of being unable to recover their unclaimed property, because Delaware's unclaimed
property fund is not experiencing a financial shortfall.

Indeed, Delaware has collected

significantly more unclaimed property than it returns to owners. (A588, A 723).
Finally, defendants' use of estimation will not make it easier for owners to be reunited with
their abandoned property, and may, in fact, make it harder. Unclaimed property recovered by
estimation necessarily does not identify the owner, the property, or the property's value. But the
state's instructions for recovering unclaimed property provide that "[i]f property is not found in
[the owner's]

name~"

then "a claim cannot be initiated." (D.I. 115-5 at 16). There is evidence

suggesting that the lack of names makes it harder for owners to claim abandoned property. (See
A574-79 (defendants discussing difficulties ofresolving owner's claim because escheatment was
not through ari itemized list identifying individual property but a bulk settlement amount); A30002 (defendants unable to give an example of when estimated property was returned to an owner)).
Defendants blithely assert that if an owner cannot claim abandoned property because it is
estimated, it is still better that the estimated property is used to serve the public good than to
increase the profit margins of Delaware corporations. (D.I. 115 at 13). It is true that unclaimed
property should not become a windfall for holders. See, e.g., In re Monks Club, Inc., 394 P.2d
804, 806 (Wash. 1964). But, at the same time, unclaimed property laws were never intended to be
a tax mechanism whereby states can raise revenue as needed for the general welfare. (A35). States
violate substantive due process if the sole purpose of enacting an unclaimed property law is to
raise revenue. Memo Money Order Co. v. Sidamon-Eristoff, 754 F.Supp.2d 661, 678 (D.N.J. 2010)

28

(finding that unclaimed property laws enacted with the intent to raise revenue for the state's general
fund did not violate substantive due process "so long as revenue raising was not the only basis for
the legislation" (emphasis in original)); NJ Retail Merchants Ass 'n v. Sidamon-Eristoff, 669 F.3d
374, 398 (3d Cir. 2012) ("[E]ven if revenue-raising was the primary purpose behind enacting [an
unclaimed property law], as long as it was not the only legitimate purpose underlying the
legislation, [the law] will pass rational basis examination." (emphasis added)).
Unfortunately, defendants offered no credible reason for using estimation as it did in
plaintiffs audit other than to raise revenue. Defendants weakly assert that estimation permits an
owner, otherwise prevented by a statute oflimitations from recovering abandoned property directly
from the plaintiff, to obtain that property if it is in the custody of the state. (D.I. 115 at 13). But
Section 1202 already serves this very purpose. Section 1202 provides that a statute of limitations
between the holder and owner does not excuse the holder's duty to escheat the abandoned property
to the state. 12 Del. C. § 1202. As a result, an owner can recover indirectly from the state what it
could not recover directly from plaintiff. Estimation has nothing whatsoever to do with this
process.

4.

Estimation

Courts have routinely upheld the government's use of statistical sampling as a valid audit
tool, provided it was properly performed. Chaves Cty. Home Health Serv., Inc. v. Sullivan, 931
F.2d 914, 919 (D.C. Cir. 1991) (noting that statistical sampling is routinely permitted where caseby-case review would be too costly); Balko & Assocs., Inc. v. Sec '.Y of Health & Human Servs.,
555 F. App'x 188, 194 (3d Cir. 2014) (using statistical extrapolation to determine amount of
Medicare overpayments); United States v. Ukwu, 546 F. App'x 305, 308, 310 (4th Cir. 2013)
(upholding the use of statistical sampling to prove amount of loss in tax fraud case).

29

An estimation is properly performed when it is based on the principle that the unclaimed
property in the reach-back years has "all the same qualities and characteristics" as unclaimed
property in the base-years .. See United States v. Mehta, 594 F.3d 277, 283 (4th Cir. 2010)
(explaining that an extrapolation estimates the values of a function or series outside a range based
on the assumption that the trends followed inside the range continue outside it); In re Chevron
US.A., Inc., 109 F.3d 1016, 1019-20 (5th Cir. 1997) ("The essence of the science of inferential
statistics is that one may confidently draw inferences about the whole from a representative sample
of the whole"). Accordingly, due process violations arise where the estimation methodology
creates misleading results. See Daytona Beach Gen. Hosp., Inc. v. Weinberger, 435 F.Supp. 891,
900 (M.D. Fla. 1977) (finding denial of due process where sample size was too small); Yorktown
Med. Lab., Inc. v. Perales, 948 F.2d 84, 90 (2d Cir. 1991) (finding no due process violation from
use of extrapolation where there was a "low risk of error").
Here, defendants acknowledged this essential principle, but failed to apply it. (A743).
Defendants admit that "for the periods where records do not exist, we were estimating for all states.
Not just Delaware. And we don'tjust use Delaware property to estimate for periods where records
do not exist. We use property from every state." (A295). Defendants do not dispute that, under
the primary rule of the Texas cases, Delaware cannot escheat any checks from the base years with
· payees in other states.

But defendants estimated that plaintiff owed unclaimed property to

Delaware by extrapolating those checks into the reach back years.
Defendants' actions are premised on the logic that they do not need to extrapolate the
characteristics of the property on which the estimation is based, because, if records do not exist,
then the address is unknown. When the Supreme Court created the priority rules, however, it was
addressing the escheatment of intangible personal property, such as money orders, where the

30

property clearly existed but the owner's address could not be ascertained from the four comers of
that property or related records. See, e.g., Pennsylvania v. New York, 407 U.S. 206, 207 (1972).
Defendants' logic stretches the definition of address unknown property to troubling lengths.
More important, defendants' logic is contrary to the fundamental principle of estimation.
Defendants are using the existence of unclaimed property in base years to infer the existence of
unclaimed property in the reach back years.

But defendants are not extrapolating the

characteristics of the property that would reduce the liability owed to Delaware. If the property in
base years shows an address in another state, then the characteristic of that property has to be
extrapolated into the reach back years. Defendants simply did not do that. Because defendants
employed estimation in a manner where the characteristics and qualities of the property within the
sample were not replicated across the whole, it created significantly misleading results.
5.

Multiple Liability

The U.S. Supreme Court held in the Texas cases that "the same property cannot
constitutionally be escheated by more than one State." Texas, 379 U.S. at 678-79. Accordingly,
if plaintiff escheats property to Texas, plaintiff cannot escheat that same property to Delaware. If
a state forces a holder to escheat the same property already escheated to another state, then the
holder is subjected to what plaintiff calls "multiple liability." (D.I. 113 at 10). No case has
addressed whether estimation based on the same property results in multiple liability. But it seems
logical that if two states use the same property in the base years to infer the existence of unclaimed
property in the reach back years, then a holder is being compelled to escheat the same estimated
property to two states, in violation of the principles articulated in the Texas cases. This is exactly
what happened to plaintiff.

31

A Texas audit of plaintiff covered the same nineteen years as Delaware's audit. (D.I. 119
at 7-8). Texas used payroll checks from 1999-2005 that were payable to Texas employees to
estimate plaintiff's liability for years 1996-1998. (D.I. 113 at 15). Defendants also used payroll
checks from 2004-2005 payable to Texas employees to estimate plaintiff's liability for the years
1996-1998. (Id.). As a result, plaintiff estimates that it was subject to at least $299,085.86 in
multiple liability. 19 (Id.).
Defendants assert that there is no risk of multiple liability with the use of estimation,
because only the state seeking to escheat property under the secondary rule can use estimation.
(D.I. 121 at 20 of 44). In other words, because Delaware is the state of plaintiff's incorporation
and seeks to escheat address unknown property, it is the only state that can use estimation to
calculate plaintiff's unclaimed property liability. (Id.). As a result, in defendants' view, other
states, like Texas, seeking to escheat under the primary rule cannot use estimation. (Id.). This,
however, is neither the law nor the custom. Indeed, none of the states that have adopted statutes
permitting the use of estimation, including Delaware, have expressly limited the use of estimation
to the secondary rule; and Texas' audit of plaintiff is clear evidence that, in practice, states use
estimation when calculating liability under the primary rule.
Defendants also assert that there is no risk of multiple liability because the State Escheator
is statutorily obligated to indemnify plaintiff against any claims from another person or state that
claims the property. (D.I. 115 at 15). Indemnification is not, however, adequate protection. There

19

Defendants eventually gave plaintiff a credit of$100,914.92 based on the amount plaintiff
actually escheated to Texas for the years of 1996-1998. But this credit did not eliminate the
multiple liability issue, because defendants used the Texas payroll checks to estimate that plaintiff
owed Delaware $299,085.86 for the years of 1996-998. (D.I. 115 at 9 n.2). The multiple liability
issue would be eliminated only if defendants credited plaintiff the full amount it derived from the
use of the Texas payroll checks.
32

is no identifiable property in an estimation to which another state could prove it had a priority
claim under the primary rule, especially if the other state estimates a liability too. See Texas, 379
U.S. at 682 (another state must "come[] forward with proof that it has a superior right to escheat").

6.

Summary

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 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 (viii) subjected plaintiff to multiple liability.
To put the matter gently, defendants have engaged in a game of "gotcha" that shocks the
conscience.
Nevertheless, the court is given some pause when contemplating appropriate remedies for
defendants' violation of due process. It is defendants who are best able to know which remedy
will be the most palatable in its anticipated efforts to normalize the enforcement of its unclaimed
property laws. Thus, the court will defer its decision on the subject of an appropriate remedy until
another day.

C.

The Takings Clause

The takings clause prohibits states from taking private property for public use without just
compensation. U.S. Const. amend. V, XIV. To succeed on a takings claim, plaintiff must show
that the state's action affected a "legally cognizable property interest." Am. Exp. Travel Related

Servs., Inc. v. Sidamon-Eristoff, 669 F.3d 359, 371 (3d Cir. 2012) (quoting Prometheus Radio
Project v. FCC, 373 F.3d 372, 428 (3d Cir. 2004)). A holder generally has no property interest in

33

abandoned property. Delaware, 507 U.S. at 502 (stating that abandoned funds become subject to
escheat because the holder has no property interest in the funds). Thus, there is no unlawful taking
when a state seeks to escheat abandoned property. Riggs, 581 A.2d at 1243 (noting that a takings
claim would fail because the abandoned funds to be escheated to the state were not the property of
plaintiff).
The U.S. Supreme Court has also held that the taking clause does not prohibit the mere
imposition of an obligation to pay money, such as a tax or penalty, but will prohibit the taking of
a specific fund of money. See Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586 (2013)
("It is beyond dispute that taxes and user fees are not takings." (internal punctuation omitted));

Phillips v. Wash. Legal Found., 524 U.S. 156, 160 (1998) (holding that interest income generated
by funds held in IOLTA accounts is private property of the owner of the principal for purposes of
the takings clause); Webb's Fabulous Pharm., Inc. v. Beckwith, 449 U.S. 155, 164-65 (1980)
(holding that the takings clause can apply to monetary interest generated from the operation of a
specific, separately identifiable fund of money). Defendants have repeatedly asserted that Section
1155 is not a penalty. 20 (D.I. 25 at 19; D.I. 28 at 18; D.I. 115 at 30, D.I. 121at10, 14, 29; D.I. 127
at 4 n. 1). Accordingly, defendants have used Section 1155 to identify a specific fund of money,
which, if not unclaimed property, is a legitimate property interest protected by the takings clause.
Unfortunately, the parties have taken an absolutist approach to their argument, with each
side claiming that all of the funds are, or are not, unclaimed property. Neither party, however, can
be entirely correct. There is a risk that defendants' method of estimation could be so inaccurate as
to sweep into its final assessment property that is not in fact abandoned, but rightfully belongs to

20

Defendants cannot claim that they were only responding to plaintiffs ex post facto claim
when they argued that Section 1155 was not a penalty. Defendants did not limit their assertion to
only the ex post facto context. (See, e.g., D.I. 121 at 10, 14, 22).
34

plaintiff. Defendants have acknowledged this risk. (See D.I. 115-4 at 60 (stating that "[t]he State
expects that some portion of a statistical sample will not be unclaimed property")).
The court has already concluded that the proper use of estimation can satisfy defendants'
burden that property is unclaimed.

Estimation is properly employed when it balances the

competing interests between an unlawful taking by the state and improper windfall for holders. It
appears the Delaware General Assembly tried to strike a balance by requiring that any estimate be
"reasonable." See 12 Del. C. § 1155. There are other contexts where a "reasonableness" standard
is used to determine whether an unconstitutional taking of money has occurred. See Duquesne

Light Co. v. Barasch, 488 U.S. 299, 307 (1989) (explaining that, in the field of utility rate
regulation, a reasonable rate is not a taking). Accordingly, the court holds that a reasonable
estimation of a holders' unclaimed property liability is not an unconstitutional taking. The parties
have not presented evidence or argument to the court as to whether or not the estimation was
reasonable, although the court is aware that expert reports have been prepared on this issue. Thus,
there is a dispute of material fact that cannot be resolved on summary judgment.

D.

Prohibition of Ex Post Facto Laws

The law provides a very comprehensive analytical framework for determining when a civil
penalty violates the ex post facto clause, which neither party adequately addressed. A law violates
the ex post facto clause if it "imposes a punishment for an act which was not punishable at the time
it was committed; or imposes additional punishment to that then prescribed." Coady v. Vaughn,
251 F.3d 480, 487 (3d Cir. 2001) (quoting Weaver v. Graham, 450 U.S. 24, 28 (1981)). The ex
post facto clause is limited, however, to criminal punishments and civil measures which are really
criminal punishments in disguise. Riley v. Corbett, 622 F. App'x 93, 95 (3d Cir. 2015); Harisiades

35

v. Shaughnessy, 342 U.S. 580, 595 (1952); Apfel, 524 U.S. at 538 (noting that for over 200 years
the Supreme Court has limited the ex post facto clause to the criminal context).
A statute is a disguised criminal punishment if: (i) the legislature demonstrated an express
or implied intent that the statute be a criminal punishment; or (ii) the statute is "so punitive in
purpose or effect as to negate the State's intention to deem it civil." Smith v. Doe, 538 U.S. 84, 92
(2003); Riley, 622 F. App'x at 95. "[O]nly the clearest proof will suffice to ... transform what has
been denominated a civil remedy into a criminal penalty." Smith, 538 U.S. at 92. Applying this
test here, the court finds that the Delaware General Assembly did not intend Section 1155 to act
as a criminal punishment, and the statute does not operate like a criminal punishment.
1.

Intent

When it enacted Section 1155, the Delaware General Assembly did not explicitly disclose
either a civil or punitive intent.

Several facts, however, indicate that the General Assembly

intended to implement a civil measure. The statute is codified within title 12 of the Delaware
Code, which is a civil, not criminal, title. The only penalty authorized under the UPL is referred
to as a "civil penalty." See 12 Del. C. § 1159. And any objections to the audit can be appealed
only to the Court of Chancery, which does not have subject matter jurisdiction over criminal
offenses. See 12 Del. C. § 11560) (providing for appeal to Court of Chancery). Other courts have
found these facts sufficient to infer a civil intent. See, e.g., Kansas v. Hendricks, 521 U.S. 346,
361 (1997) (finding that state's intent to create a civil proceeding was evidenced by act's placement
in the civil code); United States v. Harley, 315 F. App'x 437, 440-41 (3d Cir. 2009) (finding it
probative that the act was codified in the title for public health and welfare, rather than the title for
crimes and criminal procedure); United States v. Ward, 448 U.S. 242, 249 (1980) (finding it quite

36

clear that Congress intended to impose a civil penalty when, among other things, it labeled the
sanction a "civil penalty").

2.

The Mendoza-Martinez Factors

To determine whether Section 1155 is "so punitive either in purpose or effect" that it should
be deemed criminal, the United State Supreme Court has set forth seven factors to consider.
Kennedy v. Mendoza-Martinez, 372 U.S. 144, 168-69 (1963). The Mendoza-Martinez factors

weigh in favor of finding a criminal penalty if: (i) "the sanction involves an affirmative disability
or restraint;" (ii) the penalty has "historically been regarded as a punishment;" (iii) the penalty
"comes into play only on a finding of scienter;" (iv) the penalty "will promote the traditional aims
of punishment-retribution and deterrence;" (v) "the behavior to which [the penalty] applies is
already a crime;" (vi) the statute is not rationally connected to an alternative, non-punitive purpose;
and (vii) the penalty "appears excessive in relation to the alternative purpose assigned." Id.
Neither party addressed these factors in their briefs, but the court finds that they provide useful
· guidance in concluding that Section 1155 is not a disguised criminal penalty. 21
At least five factors clearly weigh in favor of finding that Section 1155 is not so punitive
as to negate its civil intent. Monetary penalties "do not involve an 'affirmative disability or
restraint.'" Hudson v. United States, 522 U.S. 93, 94 (1997); US. ex rel. Bergman v. Abbot Labs.,
995 F.Supp. 2d 357, 384 (E.D. Pa. 2014). A monetary penalty has not "historically been viewed
as punishment." Hudson, 522 U.S. at 104; S.E.C. v. Palmisano, 135 F.3d 860, 866 (2d Cir.1998).

21

Defendants did not identify or discuss the Mendoza-Martinez factors in either this motion
or its earlier motion to dismiss. (See D.I. 115 at 29-31 ). It is surprising that defendants did not
comprehensively address the entire analytical framework for determining when a civil penalty is
a disguised criminal penalty. (See D.I. 25 at 17-19). If defendants had brought to the.court's
attention the complete analytical framework for an ex post facto claim, it is unlikely the claim
would have survived defendants' motion to dismiss.
37

There is no scienter requirement in Section 1155. See Moyer v. Alameida, 184 F. App'x 633, 639
(9th Cir. 2006) (finding that the third factor indicates that the fee is civil, since the statute did not
require any scienter). Section 1155 does not apply to behavior that can be punished as a crime.
And, there are alternative, non-punitive purposes to which Section 1155 can be rationally
connected: to provide for the care and custody of abandoned property until it can be reclaimed by
the true owner. See 12 Del. C. § 1144(a).
In addition, there is not clear proof that Section 1155 promotes the traditional aims of
punishment. The absence of a scienter requirement is evidence that the statute "is not intended to
be retributive." Hendricks, 521 U.S. at 362. Moreover, any deterrent effect from the statute's
penalty is not dispositive, because deterrence "may serve civil as well as criminal goals." United

States v. Ursery, 518 U.S. 267, 292 (1996); Hudson, 522 U.S. at 102 (stating that "all civil penalties
have some deterrent effect").
Plaintiff raises only one argument in support of its assertion that Section 1155 is criminally
punitive. According to plaintiff, the use of estimation has resulted in an assessment that is 7,541
times greater than all authorized penalties under the UPL combined. (D.I. 113 at 35). The court
will assume for the purposes of its analysis of this factor that Section 1155 is excessive in relation
to the alternative purpose of safekeeping unclaimed property.
Overall, however, a balancing of the Mendoza-Martinez factors weighs overwhelmingly
in favor of the conclusion that Section 1155 does not have a criminally punitive purpose or effect.
Although no one factor is dispositive, the fact that Section 1155 may be excessive in relation to its
purpose does not provide the clearest proof needed to "transform what has been denominated a
civil penalty into a criminal penalty." Smith, 538 U.S. at 97. Therefore, the court concludes that,

38

as a matter of law, plaintiff has not stated a claim that defendants' application of Section 1155
violates the ex post facto clause.

VI.

CONCLUSION
For the foregoing reasons, plaintiffs motion for summary judgment (D.I. 112) is granted

as to the substantive due process claim, and denied as to the takings claim and ex post facto claim.
Defendants' motion for summary judgment (D.I. 114) is denied as to the substantive due process
and takings claim, and granted as to the ex post facto claim.

39

Appendix A
Record Retention Statutes for Unclaimed Property Acts as of 2008
Alabama: ALA. CODE§ 35-12-90 (2004) (10 years)
Alaska: ALASKA STAT.§ 34.45.300 (2004) (10 years)
Arizona: ARIZ. REV. STAT. § 44-323 (2000) (5 years)
Arkansas: ARK. CODE§ 18-28-221 (1999) (10 years)
California: NONE
Colorado: COLO. REV. STAT. ANN. § 38-13-124 (1992) (5 years)
Connecticut: NONE
Delaware: NONE
Florida: FLA. STAT. ANN.§ 717.1311 (1996) (5 years)
Georgia: GA. CODE ANN.,§ 44-12-228 (1990) (10 years)
Hawaii: HAW. REv. STAT.§ 523A-21 (2008) (10 years)
Idaho: IDAHO CODE§ 14-531 (1997) (7 years)
Illinois: 765 ILL. COMP. STAT. 1025/1 l(h)(2) (1993) (5 years)
Indiana: IND. CODE§ 32-34-1-43 (2002) (10 years)
Iowa: IOWA CODE ANN. § 556.11(8)(a) (2000) (4 years)
Kansas: KAN. STAT. ANN.§ 58-3964 (1994) (10 years)
Kentucky: KY. REV. STAT.§ 393.260 (1942) (15 years)*
Louisiana: LA. REV. STAT. ANN.§ 9:173 (1997) (10 years)
Maine: ME. REV. STAT. ANN. tit. 33, § 1972 (1997) (10 years)
Maryland: MD. CODE ANN., COM. LAW,§ 17-322 (1998) (5 years)*
Massachusetts: MASS. GEN. LAWS ANN. ch. 200A, § 7B (1981) (5 years)
Michigan: MICH. COMP. LAWS ANN. § 567.252 (1995) (10 years)
Minnesota: MINN. STAT. ANN.§ 345.46 (2005) (10 years)*
Mississippi: NONE
Missouri: Mo. ANN. STAT. § 447.539(9) (1994) (5 years)
Montana: MONT. CODE ANN.§ 70-9-821 (1997) (10 years)
Nebraska: NEB. REV. ST.§ 69-1322 (1992) (7 years)
Nevada: NEV. REV. STAT. § 120A.700 (2007) (7 years)
New Hampshire: N.H. REv. STAT.§ 471-C:35 (1986) (10 years}
New Jersey: N.J. STAT. ANN.§ 46:30B-95 (1997) (5 years)
New Mexico: N.M. STAT. ANN. § 7-8A-21 (1997) (10 years)
New York: N.Y. ABAND. PROP. LAW§ 1412-a (1980) (5 years)
I

Appendix A
Record Retention Statutes for Unclaimed Property Acts as of 2008
North Carolina: N.C. GEN; STAT. ANN.§ l 16B-73 (1999) (10 years)
North Dakota: N.D. CENT. CODE§ 47-30.1-31 (1985) (10 years)
Ohio: OHIO REv. CODE§ 169.03(F)(2) (1984) (5 years)
Oklahoma: OKLA. STAT. ANN. tit. 60, § 679.l (1991) (10 years)
Oregon: OR. REv. STAT. § 98.354 (2001) (3 years)
Pennsylvania: 72 PA. STAT.§ 1301.16 (1982) (15 years)
Rhode Island: R.I. GEN. LAWS§ 33-21.1-31 (1986) (7 years)
South Carolina: S.C. CODE ANN.§ 27-18-320 (1988) (10 years)
South Dakota: S.D. CODIFIED LAWS§ 43-41B-32 (1992) (10 years)
Tennessee: TENN. CODE ANN.§ 66-29-113 (1991) (10 years)
Texas: TEX. PROP. CODE ANN.§ 74.103 (1985) (10 years)
Utah: UTAH CODE ANN. § 67-4a-601 (1995) (5 years)
Vermont: VT. STAT. ANN. tit. 27, § 1261 (2005) (10 years)
Virginia: VA. CODE ANN. § 55-210.24: 1 (2000) (5 years)
Washington: WASH. REV. CODE§ 63.29.310 (1983) (6 years)
West Virginia: W. VA. CODE§ 36-8-21 (1997) (10 years)
Wisconsin: Wrs. STAT. ANN. § 177.31 (2005) (5 years)
Wyoming: WYO. STAT. ANN.§ 34-24-132 (1993) (5 years)

* Denotes a statute of limitations, as opposed to a record retention statute.

2