Delaware Publishes Unclaimed Property Owners' List - Why The World Should Be Watching

On October 29, Delaware published its annual list of unclaimed property holders.  Sure, residents of "The First State" should care, but companies all over the world too?  Sure.  Here's why:

Many items of unclaimed property arise from interstate or international commerce.  For example, a Delaware incorporated entity, headquartered in New York, may issue a check to a New Jersey resident for work performed in Connecticut. 

Obviously, since there are many states involved in this transaction, there needs to be some set of rules to determine which state has first priority to take custody of any unclaimed property.  Those rules were set down by the U.S. Supreme Court in 1965 in a case called Texas v. New Jersey.  In that case, the Supreme Court held, as a matter of federal common law, that first priority to take custody of unclaimed property belongs to the state of the rightful owner's last known address (in our example above, that would be New Jersey).  The court further ruled that in situations where the holder does not know the owner's last known address, the next priority to claim the property belongs to the holder's state of domicile (i.e., its state of incorporation).  Those rules have been repeatedly reaffirmed by the Supreme Court, most recently in the 1993 decision of Delaware v. New York.

Why is this important?  Most states (including Delaware) have self-expanded these priority rules to cover foreign unclaimed property.  Though neither Texas v. New Jersey nor Delaware v. New York set forth any rules to cover the situation where property is owed to a non-U.S. resident, many states take the position that unclaimed property belonging to a non-U.S. owner is escheatable to the holder's state of incorporation.  Because Delaware is a state of incorporation for thousands of U.S. companies (including much of the Fortune 500) a tremendous amount of unclaimed property belonging to non-U.S. individuals and residents gets reported to Delaware on an annual basis. 

Accordingly, a review of Delaware's annual unclaimed property list has information relating to hundreds of non-U.S. residents and entities that are owed unclaimed property being held by the State of Delaware.  Indeed, many (perhaps even a majority) of the entries listed are for non-U.S., not Delaware, owners.  Thus, Companies with significant overseas operations or businesses should review the list, even if they have no Delaware operations.

Popular Posts