Temple-Inland Inc. has challenged Delaware’s use of a statistical model to estimate its obligations under the state’s Abandoned and Unclaimed Property Law. The U.S. District Court for the district of Delaware denied, in part, the state’s motion to dismiss the case.
“In light of the court’s decision in the case, we are being called on by clients that are nearing the end of audits by Delaware and other domicile states to assess their appeal options, based on their receipt of Reports of Examination and demands for payment of liabilities that have been estimated for years with respect to which the companies do not possess complete and researchable records,” said Kendall Houghton, partner in Alston & Bird’s Unclaimed Property Group and head of its State & Local Tax Practice. “It would not surprise me to see a long queue of holders form quickly behind Temple-Inland and Osram-Sylvania as their own audits are completed.”
Houghton explained how this may benefit holders: “First, the federal court retained the case on the grounds that numerous constitutional claims had been presented for review; this underscores the availability of the Delaware district court as an alternative to the Delaware state courts, which the state legislature has designated as the sole forum for litigation of unclaimed property disputes.
“Second, the court acknowledged the meritorious nature of most of the plaintiff’s constitutional claims; holders have long articulated those concerns to the State of Delaware and its contract audit firms, and we anticipate that even this preliminary ruling in Temple-Inland is going to shift the landscape in pending audits and VDAs.”