On November 2, 2022 William W. Palmer of Palmer Law Group APLC and David P. Primack of McElroy Deutsch Mulvaney & Carpenter LLP proposed a class-action lawsuit on behalf of 2 US residents and 2 foreign residents from Italy and France. The plaintiffs are challenging the State of Delaware’s application of its unclaimed property laws. The complaint, filed in Delaware federal court, alleges that over $1 billion in bank accounts, investment accounts, and other property has been seized without constitutionally protected due process. As reported in the Law360 article Delaware State Is Acting Like A ‘Feudal Lord,’ Investors Say, the complaint alleges that Delaware ignores the statutory and constitutional provisions designed to protect owners and their property rights in seizing the property, and then makes it “difficult or impossible” for individuals to get their property back.
The lawsuit is being brought on behalf of the individuals and heirs – both domestic and foreign – who are the true owners of thousands of accounts that have been improperly escheated to Delaware. This is a first-of-its-kind class action lawsuit that represents the interests of the people and families – including foreign citizens – who have been negatively impacted by Delaware unclaimed property program.
Corporate America has vocally objected to Delaware’s unclaimed property system for many years, as documented by lawsuits involving Seimans USA Holdings Inc., Temple-Inland Inc., and the ongoing Moneygram lawsuit (Delaware v. Pennsylvania and Wisconsin, which is currently in front of the United States Supreme Court). However, these lawsuits do not focus on the harm inflicted on consumers and families whose property is being seized.
This class action illustrates that what has evolved in Delaware is a fundamentally corrupt system where:
- proper due process and notice is not provided to property owners before the property is seized
- the state is incapable of providing the assistance that owners truly need to resolve the issues
- the state has created barriers that prevent the owners themselves from understanding their claim potential without incurring significant cost
- the state, under the guise of privacy, withholds information that would allow owners and heirs to claim the property
- the state’s claims process seems ignorant of and incompatible with the fact that foreign property owners comprise over 95% of the individuals impacted by their program
- the state does not publish or acknowledge any firm set of documented claim requirements or rules by which they will validate claims
“The cumulative effect of these issues is that hundreds of thousands of account owners and their families are being denied the ability to present claims and receive funds because of the unfair practices that have been implemented,” said lead attorney William W. Palmer.
While the purpose of any unclaimed property program is to facilitate the return of property to the rightful owners (based on the belief that the states have a greater ability to cause this outcome than do the original property holders such as banks, corporations, etc.) Delaware’s historical practices clearly do not serve the interest of the property owners. Delaware raises over $400 million annually from unclaimed property that the state treats as revenue which is relied upon for 6% of their FY2023 budget.
Plaintiffs are seeking relief on behalf of a presumptive class of similarly situated property owners across the world. They are also calling on Delaware to change its policies and practices to conform to state and constitutional law.