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1/8/19 8:29 AM

A New Delaware Unclaimed Property Lawsuit

by Clive Cohen

delawareIn December 2018, Univar, Inc. filed an action in U.S. District Court asking the Court to stop an existing unclaimed property audit being conducted by Kelmar Associates, LLC.  In their complaint, Univar seeks a declaratory judgement that the audit violates several matters, including Delaware’s Escheat law, federal common law and certain clauses of the U.S. Constitution.

 In December 2015, Delaware issued an audit notice to Univar, indicating that the audit would be conducted by Kelmar as the state’s agent. Univar disputed the legitimacy of the audit including calling into question Kelmar’s audit protocols. On October 30, 2018, Delaware issued a subpoena to Univar requiring Univar respond to Kelmar’s document requests, which Univar had not responded to. In response to the subpoena, Univar filed this complaint to stop the audit. Among other matters, the complaint alleges:

  • the rationale used to select Univar for audit violates Univar’s equal protection rights;
  • the use of estimation, the estimation process and the use of a contingent third-party auditor violates the U.S. Constitution’s Ex Post Facto Clause, Due Process Clause, and is an unconstitutional taking; and
  • violations of confidentiality provisions in Delaware’s Escheat Law.

Univar’s complaint is similar to another Delaware case, Plains All American Pipeline LP v. Cook.

In this 2015 case, Plains brought suit against Delaware in federal court seeking a declaratory judgment that their proposed Kelmar audit was unconstitutional. Plains made many of the same claims that Univar is making. Ultimately, there was no conclusion to this case as Plains converted its audit into a voluntary disclosure review under Delaware’s VDA program. 

Delaware’s Escheat law has been the subject of a number of cases over recent years.  However, what makes this case unique, is that Univar is the first holder seeking to stop an audit after Delaware amended its unclaimed property statute in February 2017 to address issues associated with its audit program.

We will continue to monitor this matter and advise of any developments.

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Topics: Delaware, Audit