April 5, 2017
Appeal from the United States District Court for the District
of Delaware (District Court No. 1-15-cv-00468) District
Judge: Honorable Richard G. Andrews
Phillip B. Dye, Jr. Deborah C. Milner Vinson & Elkins
Jeremy C. Marwell ARGUED Christian D. Sheehan Vinson &
Elkins James E. O'Neill, III Colin R. Robinson Bradford
J. Sandler Pachulski Stang Ziehl & Jones Attorneys for
Caroline L. Cross Jennifer R. Noel Delaware Department of
Justice Marc S. Cohen Loeb & Loeb Tiffany R. Moseley
Steven S. Rosenthal ARGUED John D. Taliaferro Loeb & Loeb
Attorneys for Appellees Thomas Cook, David M. Gregor and
Michelle M. Whitaker.
J. Phillips Manion Gaynor & Manning Stephen W. Kidder
Ryan P. McManus ARGUED Hemenway & Barnes Attorneys for
Appellee Kelmar Associates LLC.
Before: CHAGARES, SCIRICA, and FISHER, Circuit Judges
FISHER, CIRCUIT JUDGE.
states have laws authorizing them to seize private property
through escheat, "a procedure with ancient origins
whereby a sovereign may acquire title to abandoned property
if after a number of years no rightful owner appears."
Texas v. New Jersey, 379 U.S. 674, 675 (1965). But
in recent years, state escheat laws have come under assault
for being exploited to raise revenue rather than reunite
abandoned property with its owners. Delaware's Escheats,
or Unclaimed Property, Law is no exception; as unclaimed
property has become Delaware's third-largest source of
revenue, companies have brought a wave of lawsuits
challenging the constitutionality of Delaware's escheat
case, Plains All American Pipeline ("Plains") seeks
to attack the constitutionality of several provisions of the
Delaware Escheats Law, as well as Delaware's demand that
it submit to an abandoned property audit. But because Plains
brought suit before Delaware assessed liability based on its
audit or sought a subpoena to make its audit-related document
requests enforceable, the District Court dismissed the suit,
finding that Plains's claims were unripe except for an
equal protection claim that it dismissed for failure to state
a claim. Although we disagree with the District Court that
Plains's as-applied, procedural due process claim is
unripe and will therefore reverse and remand in part, we will
affirm the District Court's dismissal in all other
in a practice that dates back to feudal times, Delaware's
Escheats Law is the mechanism by which Delaware takes custody
of abandoned property in the State. As amended,
law provides that a holder of "property presumed
abandoned" must file a yearly report with the State
Escheator in which it provides information about the property
and its possible owner. Del. Code Ann. tit. 12, §§
1142, 1143. When filing the yearly report, the holder must
"pay or deliver . . . the property described in the
report" to the State Escheator, id. §
1152, who then takes custody of the property and may sell it.
ensure compliance with the law, the statute permits the
Escheator to "[e]xamine the records of a person or the
records in the possession of an agent, representative,
subsidiary, or affiliate of the person under examination in
order to determine whether the person complied with this
chapter." Id. § 1171(1). And the
"State Escheator may contract" with private
third-parties to perform this audit on his or her behalf.
Id. § 1178(a). If the person subject to
examination "does not retain the records required,
" the "State Escheator may determine the amount of
property due using a reasonable method of estimation."
Id. § 1176(a). And if the State Escheator
completes its examination and "determines that a holder
has underreported unclaimed property due and owing, "
the State Escheator "shall mail a statement of findings
and request for payment to the holder that filed."
Id. § 1179(a). When liability is assessed, the
State may charge interest and penalties. Id. §
1183. But the holder of the abandoned property may seek
judicial review of the Escheator's decision in the Court
of Chancery. Id. § 1179(b).
October 22, 2014, Delaware's Audit Manager, Michelle
Whitaker, sent Plains a notice that the State intended to
audit its records from 1986 through present to evaluate its
compliance with Delaware's Escheats Law. In that notice,
Whitaker informed Plains that Kelmar Associates, a private
auditing firm that conducts a large percentage of
Delaware's unclaimed property audits, would conduct the
audit; that she was "the final arbiter of any disputes
that may arise during the course of the examination";
and that the audit would be expanded back to 1981 if not
completed by June 30, 2015. J.A. 200.
Kelmar sent Plains its initial document requests, Plains sent
a letter raising several constitutional objections to the
audit and informing Whitaker that it would not respond to
Kelmar. Dismissing Plains's concerns as unfounded,
Whitaker responded that multistate audits were common and
Delaware's actions were legal. She directed Plains to
"produce the records requested" by Kelmar and noted
that "the State will consider the level of
[Plains's] cooperation when determining whether penalties
should be assessed, or whether any other statutorily
available actions should be taken, in connection with any
past due unclaimed property that is identified as a result of
the examination." J.A. 325.
did not respond to Whitaker. Instead, it sued Kelmar,
Whitaker, Delaware Secretary of Finance Thomas Cook, and
Delaware State Escheator David Gregor in federal court for a
declaration that the proposed audit violated the
Constitution, an injunction preventing the defendants from
pursuing the audit, and attorney's fees. In its initial
complaint, Plains alleged that the proposed audit and
portions of Delaware's Escheats Law violated the Fourth
Amendment, as well as the Ex Post Facto, Due Process, Equal
Protection, and Takings Clauses of the Constitution. But
Plains later amended its complaint to add one claim that
Kelmar conspired with Delaware to violate its rights and two
claims that Delaware's Escheats Law was void for
vagueness and preempted by federal law.
2015, the Defendants moved to dismiss the amended complaint
under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).
The District Court dismissed this case on August 16, 2016,
finding that Plains's claims were all unripe except for
an equal protection ...