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Settlement Reached in Temple-Inland; Delaware Internally Reviewing Unclaimed Property Audit Practices

The court case challenging Delaware’s unclaimed property audit methodologies has settled following an opinion brutalizing Delaware’s position. This settlement leaves the US District Court for the District of Delaware (District Court) holding as precedent, but the issue of what methods Delaware must jettison remains open.

Last Friday, Temple-Inland and Delaware filed a joint motion to dismiss with prejudice in the District Court after the parties agreed to settle the dispute. While the settlement agreement was not publicly disclosed, we understand that Delaware agreed to withdraw its entire assessment (totaling $2,128,834.13) and pay Temple-Inland’s attorneys’ fees and costs, including expert witness reports. The settlement avoids an affirmation by the US Court of Appeals for the Third Circuit that Delaware’s audit practices and estimation techniques collectively “shock the conscience,” but remains a significant holder victory given that the Temple-Inland District Court opinion, which is detailed in our prior blog, can now be cited as binding (and finally resolved) precedent by similarly situated holders under audit by the State. (more…)




Uniform Law Commission Completes First Reading of the Revised Uniform Unclaimed Property Act

On Tuesday, July 14, 2015, at their Annual Meeting the Uniform Law Commission (ULC) completed their first reading of the Revised Uniform Unclaimed Property Act (RUUPA or the Act). While over half of the sections comprising the current draft of the Act were passed over due to strict time constraints imposed by the ULC President Harriet Lansing, the RUUPA Drafting Committee (Committee) did their best to focus the time they did have on sections they felt were most in need of feedback from the ULC Commissioners (Commissioners) as a whole. The Committee even went so far as to invite discussion by allowing American Bar Association (ABA) Advisors and National Association of Unclaimed Property Administrators (NAUPA) to explain their stances on hot button issues such as the derivative rights doctrine, life insurance provisions and the inclusion of a business-to-business exemption. Despite this attempt, Commissioner feedback was sparse (to non-existent) for a majority of the reading and was often technical in nature when provided. While over 250 of the 400 Commissioners were present at the Annual Meeting, only about half of those present attended the morning session of the RUUPA reading. After a lunch break, the afternoon session of the reading was even more sparsely attended, with less than 100 Commissioners present. While the turnout and participation was not ideal, the Committee provided some guidance to the Commissioners that may be useful to interested parties going forward.

Highlights

  • Committee Co-Chair Rex Blackburn made it clear that they would be considering the application of the derivative right doctrine, which generally stands for the proposition that state unclaimed property administrators cannot receive greater rights than those of the true owner, on a property-type basis (as opposed to a blanket inclusion or exclusion). Aside from the short ABA-NAUPA debate on the issue, there was no substantive discussion of the derivate rights doctrine.
  • A return to the 1981 Act’s 10-year statute of repose was discussed. Commissioner Raymond Pepe noted that the Committee reverted back to this based on the widespread abuse of statistical sampling. Several Commissioners were supportive of this change, and even encouraged the Committee to shorten this period further since the statute does not begin running until after the report was due. Nebraska Commissioner Harvey Perlman suggested that the Committee simply limit the use of abusive statistical sampling instead of establishing a statute of repose. The Committee responded that a bright-line rule is necessary here to provide certainty.
  • The Committee confessed that the current section on the conduct of audits (Section 20) needs to be broken out into four distinct sections in the next draft. A majority of the discussion in this area was on the use of contingent fee contract auditors—which is permitted in the current draft with numerous protections that seek to enhance the transparency of this process. Connecticut Commissioner David Biklen suggested that his state would not be able to audit holders without the use of contract auditors and expressed concern [...]

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