Are Delaware's unclaimed-property voluntary disclosure agreement records public, or are they confidential under the escheat statute?

Official title

24-IB23 06/25/2024 FOIA Opinion Letter to Hayley J. Reese, Esq. re: FOIA Complaint Concerning the Delaware Department of State

Plain-English summary

Hayley Reese of McCarter & English filed a FOIA request with the Delaware Department of State asking for three categories of records about the unclaimed-property voluntary disclosure program: (1) all notifications since January 2023 inviting individuals or entities to enroll in the voluntary disclosure agreement (VDA) program, (2) all signed VDAs received since January 2023, and (3) a forward-looking contact list of all individuals and entities the Department intends to invite from the request date through December 31, 2024.

The Department denied the request under 29 Del. C. § 10002(o)(6), the FOIA exemption for records "specifically exempted from public disclosure by statute or common law." The Department pointed to 12 Del. C. § 1174, which provides that records and work papers compiled by the Department in the course of conducting a voluntary disclosure under § 1173 are not "public records" under FOIA, and that they are subject to the confidentiality provisions of § 1189.

The AG sided with the Department. The records Reese sought are part of the voluntary disclosure program: the invitation letters initiate the disclosure process, the signed VDAs evidence enrollment, and the future-invitee list is the planning output of the Department's research. Each falls within § 1174's scope. The opinion forecloses the workaround Reese proposed (that pre-enrollment records are not yet "in the course of" the disclosure) and the consent-to-disclosure-elsewhere argument under § 1174(3) and (4) (which permit disclosure between jurisdictions but do not waive confidentiality vis-à-vis FOIA requests).

This opinion is the canonical AG citation for treating Delaware's unclaimed property VDA program records as off-limits under FOIA, even when the requester is a sophisticated unclaimed property practitioner.

What this means for you

For Delaware unclaimed-property practitioners and the corporate counsel they advise. The contact list, the invitation letters, and the signed VDAs are not available through FOIA. Other practitioners' clients who have been invited to enroll are not visible to your client. If you want to know who else is on the list, you have to ask the Department of State directly, and it will say no. The opinion forecloses the strategy of using FOIA to map the Department's enforcement targeting.

For state escheat program staff. The opinion's framing is helpful for reaffirming that pre-enrollment activities (researching potential enrollees, sending invitation letters, processing signed agreements) are all part of "conducting" a § 1173 voluntary disclosure. The "course of conducting" language is broader than the moment of formal enrollment.

For corporate compliance officers receiving Department invitations. A Department of State invitation letter is the start of a confidential process. The letter, your response, and the signed VDA itself are protected from FOIA disclosure. That confidentiality benefits the holder by protecting business-sensitive financial data. It is also why third-party researchers cannot easily quantify the program's reach.

For journalists and academics studying state escheat enforcement. The aggregate program data may be available through legislative oversight or annual reports, but individual-level data and lists of invited entities are not. If you need to study patterns, ask the Department's Administrator for the voluntary disclosure program for any aggregated, de-identified statistics they can share outside FOIA's restrictions.

Common questions

What's an unclaimed-property voluntary disclosure agreement?
Delaware (where many large U.S. corporations are domiciled) runs an aggressive escheat program. Through the Department of State's voluntary disclosure program (12 Del. C. § 1173), an entity that may owe unclaimed property to the State can voluntarily come forward, agree to a structured review of its books, and resolve its escheat liability without facing the more invasive Department of Finance audit process under § 1171. The "invitation" model means the Department uses nonpublic information to research potential targets and then sends a letter offering enrollment in the VDA program or facing a § 1171 audit.

Why does Delaware care so much about unclaimed property?
Because of the volume of corporate domicile in Delaware. Many large companies are Delaware corporations, and unclaimed property derived from those companies can be claimed by Delaware as the state of last known address (or, if unknown, of incorporation). This produces substantial revenue.

Why didn't Reese's narrowing argument work?
Reese argued that pre-enrollment records (the invitation letters and the future-invitee list) were not "in the course of" conducting a voluntary disclosure under § 1173, because no disclosure had yet started. The AG read the statute more broadly: identifying targets, sending invitations, and signing VDAs are all part of conducting the program. The Department's research that produces the invitation list is itself "necessary components to conduct a Section 1173(b) voluntary disclosure."

What about the disclosure-to-other-states permission in § 1174(3) and (4)?
Section 1174 permits the Department to share VDA records with another state under specified conditions (with the holder's consent under (3), or with another jurisdiction that maintains confidentiality under (4)). Reese argued that sharing-elsewhere is inconsistent with confidentiality-here. The AG and the Department's affidavit rejected that. The records can be confidential in Delaware while being shareable with other escheat regulators under controlled conditions.

Is there any path to access?
The opinion suggests the answer is no, at least through FOIA. Other paths might include direct federal preemption analysis if the records bear on federal disputes, or specific legislative oversight requests through Delaware General Assembly channels, but those are outside the scope of this opinion.

Background and statutory framework

Delaware's escheat statute is at 12 Del. C. ch. 11 (§§ 1130-1199, the "Revised Uniform Unclaimed Property Act"). Section 1171 governs the Department of Finance's examination process. Section 1173 governs the Department of State's voluntary disclosure program. Section 1173(b) specifically authorizes the Department to send participation invitations.

Section 1174 closes the loop with FOIA: "All of the following apply to records obtained and records, including work papers, compiled by the State Escheator or the Secretary of State in the course of conducting an examination under § 1171 of this title or a voluntary disclosure under § 1173 of this title: (1) The records are subject to the confidentiality and security provisions of § 1189 of this title and are not a 'public record' under Chapter 100 of Title 29."

29 Del. C. § 10002(o)(6) excludes from FOIA's "public record" definition "any records specifically exempted from public disclosure by statute or common law." When § 1174 says the records are not public records, § 10002(o)(6) carries that exclusion into FOIA.

Citations

• 29 Del. C. § 10002(o)(6): exempted by statute or common law
• 29 Del. C. § 10005(c): burden of proof
• 12 Del. C. § 1130 et seq.: Revised Uniform Unclaimed Property Act
• 12 Del. C. § 1171: Department of Finance examination process
• 12 Del. C. § 1173: Department of State voluntary disclosure program
• 12 Del. C. § 1173(b): invitation authority
• 12 Del. C. § 1174: records confidentiality; not public records
• 12 Del. C. § 1174(3), (4): interjurisdictional disclosure permissions
• 12 Del. C. § 1189: confidentiality and security
• Judicial Watch, Inc. v. Univ. of Del., 267 A.3d 996 (Del. 2021)

Source

• Landing page: https://attorneygeneral.delaware.gov/2024/06/25/24-ib23-06-25-2024-foia-opinion-letter-to-hayley-j-reese-esq-re-foia-complaint-concerning-the-delaware-department-of-state/
• Original PDF: https://attorneygeneral.delaware.gov/wp-content/uploads/sites/50/2024/07/Attorney-General-Opinion-No.-24-IB23.pdf

Original opinion text

DEPARTMENT OF JUSTICE

KATHLEEN JENNINGS

820 NORTH FRENCH STREET
WILMINGTON, DELAWARE 19801

ATTORNEY GENERAL

CIVIL DIVISION (302) 577-8400
CRIMINAL DIVISION (302) 577-8500
DIVISION CIVIL RIGHTS & PUBLIC TRUST (302) 577-5400
FAMILY DIVISION (302) 577-8400
FRAUD DIVISION (302) 577-8600
FAX (302) 577-2610

OFFICE OF THE ATTORNEY GENERAL OF THE STATE OF DELAWARE
Attorney General Opinion No. 24-IB23
June 25, 2024
VIA EMAIL
Hayley J. Reese
McCarter & English, LLP
[email protected]

RE: FOIA Petition Regarding the Delaware Department of State

Dear Ms. Reese:
We write regarding your correspondence alleging that the Delaware Department of State violated the Delaware Freedom of Information Act, 29 Del. C. §§ 10001-10008 ("FOIA"). We treat your correspondence as a Petition for a determination pursuant to 29 Del. C. § 10005 regarding whether a violation of FOIA has occurred or is about to occur. For the reasons set forth below, we find that the Department did not violate FOIA by denying access to the requested records pursuant to 29 Del. C. § 10002(o)(6).

BACKGROUND
The Department of State conducts a voluntary disclosure program, in which an entity may enroll voluntarily or, after the Department's research of nonpublic information, be invited by the Department to enroll. 1 The Department's invitation gives two options: enrollment in the voluntary disclosure program or an unclaimed property examination conducted by the Department of Finance. 2

1 12 Del. C. § 1173; Response.
2 Id.

On April 5, 2024, you submitted a FOIA request for the following records:
1. All notifications by the Delaware Secretary of State referring and/or relating to the opportunity, authority, ability, and/or eligibility for individuals and entities to enter into an unclaimed property voluntary disclosure agreement from January 1, 2023 through and including the date of this request;

2. All signed unclaimed property voluntary disclosure agreements received by the Delaware Secretary of State from January 1, 2023 through and including the date of this request; and

3. A list of all individuals and entities, together with contact names and addresses, to whom the Delaware Secretary of State intends to send notifications referring and/or relating to the opportunity to enter into an unclaimed property voluntary disclosure agreement and/or an invitation to participle in the unclaimed property voluntary disclosure program from the date of this request through and including December 31, 2024. 3

In response, the Department denied access to these requested records under 29 Del. C. § 10002(o)(6), which exempts "any records specifically exempted from public disclosure by statute or common law." The Department relied on 12 Del. C. §§ 1130 et seq., 1173, 1174 and 1189 for its denial. This Petition followed.

The Petition alleges that this denial was inappropriate under FOIA. You contend that 12 Del. C. § 1173 does not refer to FOIA or codify these documents as confidential or exempt from disclosure; instead, this section merely authorizes the Secretary of the Department to enter into unclaimed property voluntary disclosure agreements. You argue that Section 1174 is inapplicable to your requests, as it applies to records obtained by the Secretary "in the course of" a voluntary disclosure under Section 1173. 4 As the first and third items in your request predate participation in a voluntary disclosure program, you claim that these records are not obtained in the course of a voluntary disclosure, and the second item does not seek records obtained by the Secretary in the course of a voluntary disclosure, only copies of the agreement evidencing consent to the program. You maintain that the requested records do not fall within the class of documents protected by Section 1174, and that the fact that Section 1174(3) and (4) allow disclosures to entities outside of the State of Delaware is counter to the Department's assertion of the documents' confidentiality. Sharing these documents outside the State, you allege, would violate any protections under Section 1189 and "give rise to concerns of waiver, estoppel, equal protection under the law, and a violation of 12 Del. C. § 1189." 5 You assert that Section 1189 does not grant confidentiality to these requested documents, as the request does not seek information concerning the amount of the unclaimed property or the owner of the unclaimed property. Additionally, you argue that the Department's reliance on Section 10002(o)(6) is without merit, as you have demonstrated the underlying sections are inapplicable and the Department failed to articulate another basis under this exemption for withholding the records. Finally, you speculate that the documents may be otherwise publicly disseminated through unofficial channels or in response to FOIA requests, further undermining the Department's confidentiality claims.

The Department, through its legal counsel, replied to this Petition ("Response") and included the affidavit of the Department's Administrator for the voluntary disclosure of abandoned or unclaimed property. The Department contends that its response was proper. The Department asserts that due to the sensitive nature of Delaware legal entities' corporate and financial data, information compiled in connection with the voluntary disclosure program and the Department of Finance's examination process is strictly confidential and exempt under FOIA. The Department states that the requested records are confidential pursuant to the identified statutes. The Department states that in the Petition, a key term is excluded from the statement of Section 1174, clarifying that this section applies to records, including work papers, compiled by the Secretary "in the course of conducting . . . a voluntary disclosure under § 1173 of this title." 6 The Department asserts that it uses nonpublic information to research potential enrollees and sends a document resulting in enrollment in either the voluntary disclosure program or the Department of Finance's examination and thus, is conducting a voluntary disclosure under Section 1173 within the meaning of Section 1174. As Section 1173(b) authorizes the Department to request participation in the program, the work papers compiled to identify enrollees are necessary components to conduct a Section 1173(b) voluntary disclosure.

The Department alleges that this request seeks these records for personal or commercial purposes, which is not consistent with FOIA's objectives. The Department asserts that Section 1189 makes it unlawful for the Department to disclose any supporting documentation related to any voluntary disclosure agreement, meaning it cannot lawfully provide responsive records to these requests. The Department states that Section 1174's permissions for disclosure to another jurisdiction are limited to disclosures with the holder's consent pursuant to Section 1174(3) and when the other jurisdictions maintain confidentiality in Section 1174(4). According to the Department's affidavit, the requested records have not been disclosed to another jurisdiction, nor have they been publicly disseminated.

DISCUSSION
The public body has the burden of proof to justify its denial of access to records. 7 In certain circumstances, a sworn affidavit may be required to meet that burden. 8 In this case, the Department contends that the requested records are exempt from disclosure by statute pursuant to 29 Del. C. § 10002(o)(6). Section 1174 declares the following records are not "public records" under FOIA:

All of the following apply to records obtained and records, including work papers, compiled by the State Escheator or the Secretary of State in the course of conducting an examination under § 1171 of this title or a voluntary disclosure under § 1173 of this title: (1) The records are subject to the confidentiality and security provisions of § 1189 of this title and are not a "public record" under Chapter 100 of Title 29.

Records obtained and records, including work papers, compiled by the Secretary in the course of conducting a voluntary disclosure under Section 1173 are not public records. This request seeks notifications by the Secretary relating to the opportunity, authority, or eligibility to enter the voluntary disclosure program, signed voluntary disclosure agreements received by the Secretary, and the list of companies and individuals, with contact information, to whom the Secretary intends to send notifications regarding the opportunity or an invitation to participate in the program. These records are part of conducting the voluntary disclosure. Based on these statutory provisions and the Department's Response, we determine that the requested records are within the scope of Section 1174 and are statutorily exempt from disclosure under FOIA pursuant to 29 Del. C. § 10002(o)(6). Thus, we find no violation of FOIA occurred.

CONCLUSION
Accordingly, we determine that the Department did not violate FOIA by denying access to the requested records.

Very truly yours,
/s/ Alexander S. Mackler

Alexander S. Mackler
Chief Deputy Attorney General

cc:
Laura L. Gerard, Deputy Attorney General
Dorey L. Cole, Deputy Attorney General

3 Petition, Ex. 1.
4 Id., p. 2.
5 Id.
6 Response, p. 4.
7 29 Del. C. § 10005(c).
8 Judicial Watch, Inc. v. Univ. of Del., 267 A.3d 996 (Del. 2021).