Loeb & Loeb LLP successfully secured dismissal of two separate actions challenging the State of Delaware’s legal right to audit Delaware-incorporated companies for compliance with the state’s escheat (unclaimed property) law.
On September 23, the U.S. District Court for the District of Delaware dismissed a lawsuit filed by Marathon Petroleum Corp. and its subsidiary, Speedway LLC, claiming that Delaware’s audit of company records concerning unredeemed gift cards is preempted by federal common law and in violation of the Fourth Amendment. The court determined that that the plaintiffs failed to state a plausible claim on both counts and granted Delaware’s motion to dismiss.
The Marathon Petroleum victory came on the heels of another significant decision issued by a different district judge of the Delaware District Court last month dismissing a similar suit brought by Plains All American Pipeline LP against the State of Delaware, challenging an audit of Delaware-incorporated Plains for potential escheat liability. Plains refused to submit to an unclaimed property audit initiated by Delaware in 2014. Because the suit was filed before the audit process even began, the court agreed with Loeb & Loeb that most of the plaintiff’s claims were premature and “premised on contingencies.” The court also rejected plaintiff’s argument that Delaware violated the Equal Protection Clause by targeting large, wealthy companies for audit, finding instead that “the [state’s] audit selection process satisfies rational basis review.”
The Loeb & Loeb team acting on behalf of the State of Delaware, Delaware's secretary of finance, state escheator and audit manager in these matters included attorneys Steven S. Rosenthal, Marc S. Cohen, Tiffany Moseley and John D. Taliaferro.
Loeb & Loeb LLP has one of the only national escheat practices in the industry dedicated to representing the interests of state beneficiaries in complex unclaimed property matters. The firm’s nationally recognized public sector litigators have successfully represented senior state officials and municipal agencies in enforcing unclaimed property laws to recover billions of dollars of funds. In addition to the State of Delaware, they have a track record of success in handling such matters on behalf of the California State Controller’s Office, among other public sector clients.