Plains All Am. Pipeline, L.P. v. Cook

• Decision Date: 16 August 2016
• Docket Number: Civil Action No. 15-468-RGA
• Citation: 201 F.Supp.3d 547
• Parties: PLAINS ALL AMERICAN PIPELINE, L.P., Plaintiff; v. Thomas COOK, in his capacity as the Secretary of Finance for the State of Delaware; David M. Gregor, in his capacity as the State Escheator of the State of Delaware; Michelle M. Whitaker, in her capacity as the Audit Manager for the State of Delaware, and Kelmar Associates, LLC, Defendants.
• Court: U.S. District Court — District of Delaware

201 F.Supp.3d 547

PLAINS ALL AMERICAN PIPELINE, L.P., Plaintiff;

v.Thomas COOK, in his capacity as the Secretary of Finance for the State of Delaware; David M. Gregor, in his capacity as the State Escheator of the State of Delaware; Michelle M. Whitaker, in her capacity as the Audit Manager for the State of Delaware, and Kelmar Associates, LLC, Defendants.

Civil Action No. 15-468-RGA

United States District Court, D. Delaware.

Signed August 16, 2016

Bradford J. Sandler, Esq., Colin R. Robinson, Esq., Pachulski, Stang, Ziehl & Jones LLP, Wilmington, DE; Phillip B. Dye, Jr., Esq. (argued), Brock R. Skelley, Esq., Deborah C. Milner, Esq., Vinson & Elkins LLP, Houston, TX, attorneys for Plaintiff Plains All American Pipeline, L.P.

Jennifer R. Noel, Esq., Caroline Lee Cross, Esq., Edward K. Black, Esq., Delaware Department of Justice, Wilmington, DE; Steven S. Rosenthal, Esq. (argued), John D. Taliaferro, Esq., Marc S. Cohen, Esq., Loeb & Loeb LLP, Washington, D.C., attorneys for Defendants Thomas Cook, David M. Gregor, and Michelle M. Whitaker.

Marc J. Phillips, Esq., Jason A. Cincilla, Esq., Manion, Gaynor & Manning LLP, Wilmington, DE; Ryan P. McManus, Esq. (argued), Stephen W. Kidder, Esq., Hemenway & Barnes LLP, Boston, MA, attorneys for Defendant Kelmar Associates, LLC.

MEMORANDUM OPINION

ANDREWS, U.S. DISTRICT JUDGE:

Presently before the Court are two motions to dismiss filed by Defendants. (D.I. 25, 29). Mr. Cook, Mr. Gregor, and Ms. Whitaker (collectively "the Delaware Defendants") move pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6). Kelmar moves pursuant to Fed. R. Civ. P. 12(b)(1), 12(b)(6), and 12(b)(7). The issues have been fully briefed. (D.I. 26, 30, 33, 35, 36, 38). The Court heard oral argument. (D.I. 45). For the reasons stated herein, the Delaware Defendants' motion to dismiss is GRANTED , and Kelmar's motion to dismiss is GRANTED .

I. BACKGROUND

This dispute concerns the enforcement of Delaware's unclaimed property laws. "Unclaimed" or "abandoned" property is property held, but not owned, by a business, where there has been no contact with the owner for a "dormancy period." Del. Code Ann. tit. 12, § 1198. That person or organization is deemed the "holder" of the property, while the owner is "any person ... having the legal or equitable title to the property ...." Id. Every business which holds unclaimed property must, each year, "file [a report] with the State Escheator," which must include certain information about the property and its possible owner. Del. Code Ann. tit. 12, § 1199. The State Escheator of Delaware is authorized to conduct unclaimed property examinations "to determine whether the person [or business] has complied with any provisions" of the Delaware unclaimed property laws.¹ Del. Code Ann. tit. 12, § 1155(a). This is commonly called an "audit" and is conducted by an "Audit Manager." In situations where business records "are insufficient to permit the preparation of the report, the State Escheator may require the holder [of unclaimed property] to report and pay to the State the amount ... that the State Escheator reasonably estimates to be due ...." Del. Code Ann. tit. 12, § 1155(b).

If the Audit Manager "determines that a holder has underreported abandoned or unclaimed property" which it owes, the Audit Manager must inform the holder, who then has sixty days to file "a written protest" with the Audit Manager, identifying "the specific grounds upon which the protest is based." Del. Code Ann. tit. 12, § 1156(a) -(b). While the Audit Manager only considers the issues set out in the protest, "[t]he holder may submit additional documentation and written submissions ... in support of the protest." Del. Code Ann. tit. 12, § 1156(c)-(d). If the Audit Manager makes an adverse determination, the holder may appeal that determination to the Secretary of Finance. Del. Code Ann. tit. 12, § 1156(f)-(g). The Secretary of Finance "shall ... appoint a person ... to act as an independent reviewer to consider the appeal of the Audit Manager's findings" under a de novo standard. Del. Code Ann. tit. 12, § 1156(g)-(h).² After the independent reviewer's determination is made, "[e]ither the holder or the Secretary of Finance may ... appeal [that] determination to the Court of Chancery." Del. Code Ann. tit. 12, § 1156(j). That review "shall be limited to whether the independent reviewer's determination was supported by substantial evidence on the record." Id.

On October 22, 2014, the Delaware Defendants informed Plaintiff that Delaware "would be conducting an examination of [Plaintiff's] ‘books and records,’ and the ‘books and records' of [Plaintiff's] ‘Subsidiaries and Related Entities.’ " (D.I. 21 ¶ 53). In late November, the third-party auditor, Kelmar, delivered to plaintiff an examination guide, a copy of its Confidentiality & Non-Disclosure Agreement, and its initial document requests. (Id. ¶¶ 56-58). Plaintiff refused to submit to the audit, and communicated a number of objections to both Kelmar and Ms. Whitaker, the Audit Manager. (Id. ¶¶ 59-66, 70-73). These objections included Kelmar "having a financial stake in the Audit's outcome," "Kelmar's insistence on a multistate audit in which it is given authorization to share [Plaintiff's] confidential information with other states," "the breadth and rational[e] of Kelmar's initial document requests," and "Kelmar's use of ‘estimation.’ " (Id. ¶ 60). Ms. Whitaker, in her March 30, 2015 response, stated that Delaware would "not agree to a bar on the use of estimation techniques" and refused Plaintiff's request that Delaware sign a confidentiality agreement. (Id. ¶¶ 70-71). At the conclusion of her letter, Ms. Whitaker "directed [Plaintiff] to fully cooperate with Kelmar, produce the records requested, and schedule an opening conference." (Id. ¶ 73).

Plaintiff, on June 5, 2015, filed this action. (D.I. 1). On August 17, 2015, Plaintiff filed the Amended Complaint, alleging violations of the Fourth Amendment, substantive due process, procedural due process, the void for vagueness doctrine, the Ex Post Facto Clause, the Takings Clause, and the Equal Protection Clause. (D.I. 21). Plaintiff also asserts conspiracy and preemption claims. (Id. ). Plaintiff seeks declaratory relief, injunctive relief, and attorneys' fees. (Id. ). On September 4, 2015, Kelmar and the Delaware Defendants moved to dismiss. (D.I. 21, 25, 29).

It should be noted that, while these motions to dismiss were pending, this Court issued an opinion relevant to some of the issues raised by Plaintiff's Amended Complaint. See Temple – Inland, Inc. v. Cook , 192 F.Supp.3d 527, 2016 WL 3536710 (D.Del. June 28, 2016) (Sleet, J.). In that case, Delaware assessed liability on the plaintiff through the use of estimation. Id. at 537–38, at *6. The liability assessed to the plaintiff was reduced by the Audit Manager, and further reduced by the independent reviewer. Id. Instead of filing an appeal with the Court of Chancery, as contemplated by the statute, the plaintiff filed an action in district court, challenging the constitutionality of the audit. Id. At summary judgment, the court concluded that Delaware's audit had violated substantive due process. Id. at 540–41, 549–50, at *8, *16. The court, however, "defer[red] its decision on the subject of an appropriate remedy until another day." Id. at 550–51, at *17.

II. LEGAL STANDARD

Rule 8(a) requires "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). When reviewing a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), the court must accept the complaint's factual allegations as true, but may disregard any legal conclusions. Fowler v. UPMC Shadyside , 578 F.3d 203, 210–11 (3d Cir.2009). The factual allegations do not have to be detailed, but they must provide more than labels, conclusions, or a "formulaic recitation" of the claim elements. Bell A t l. Corp. v. Twombly , 550 U.S. 544, 555–56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ("Factual allegations must be enough to raise a right to relief above the speculative level ... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)."). There must be sufficient factual matter to state a facially plausible claim to relief. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The facial plausibility standard is satisfied when the complaint's factual content "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. ("Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." (quotation marks omitted)).

Ripeness challenges, NE Hub Partners, L.P. v. CNG Transmission Corp. , 239 F.3d 333, 341 (3d Cir.2001), and motions to dismiss for lack of standing, Constitution Party of Pennsylvania v. Aichele , 757 F.3d 347, 357 (3d Cir.2014), are properly brought pursuant to Rule 12(b)(1). There are two ways a party may attack a complaint for lack of subject matter jurisdiction pursuant to Rule 12(b)(1). Constitution Pty. , 757 F.3d at 357–58. "A challenge to a complaint for failure to allege subject matter jurisdiction is known as a ‘facial’ challenge, and must not be confused with a ‘factual’ challenge contending that the court in fact lacks subject matter jurisdiction, no matter what the complaint alleges ...." NE Hub , 239 F.3d at 341 n. 7. In reviewing a facial challenge under Rule 12(b)(1), the court must accept all factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Id. at 341. "[T]he court must only consider the allegations of the complaint and documents referenced therein and attached thereto ...." Gould Elecs. Inc. v. United States , 220 F.3d 169, 176 (3d Cir.2000).

III. ANALYSIS

Since Defendants have not answered the complaint, the challenges to subject matter...