Marathon Petroleum Corp. v. Cook

208 F.Supp.3d 576

MARATHON PETROLEUM CORPORATION; Speedway LLC; Marathon Prepaid Card LLC ; and Speedway Prepaid Card LLC, Plaintiffs,

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; and Michelle M. Whitaker in her capacity as the Audit Manager for the State of Delaware, Defendants.

C.A. No. 16–80–LPS

United States District Court, D. Delaware.

Signed September 23, 2016

R. Eric Hutz, REED SMITH LLP, Wilmington, DE, Diane Green–Kelly, REED SMITH LLP, Chicago, IL, Attorneys for Plaintiffs.

Caroline Lee Cross, Jennifer R. Noel, Delaware Department of Justice, Wilmington, DE, Attorneys for Defendants.

John D. Taliaferro, Steven Rosenthal, Tiffany R. Moseley, LOEB & LOEB LLP, Washington, DC, Marc S. Cohen, LOEB & LOEB LLP, Los Angeles, CA, Attorneys for Defendant Thomas Cook.

MEMORANDUM OPINION

STARK, United States District Judge:

I. INTRODUCTION

On February 11, 2016, Plaintiffs Marathon Petroleum Corporation ("Marathon"), Speedway LLC ("Speedway"), Marathon Prepaid Card LLC ("MPC"), and Speedway Prepaid Card LLC ("SPC," and collectively "Plaintiffs") filed a complaint ("Complaint") against Defendants 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; and Michelle M. Whitaker, in her capacity as the Audit Manager for the State of Delaware (collectively, "Defendants"). (D.I. 1) The Complaint alleges that Delaware's Unclaimed Property Law, Del. Code Ann. tit. 12, § 1101 (2016) ("DUPL"). "violates and is preempted by federal common law." (Id. ¶¶ 1, 95) It further alleges that Defendants' actions pursuant to the DUPL have violated Plaintiffs' rights under the Fourth Amendment of the United States Constitution. (See id. ¶¶ 1, 104)

On May 16, 2016, Defendants filed a motion to dismiss Plaintiffs' Complaint for lack of subject matter jurisdiction and for failure to state a claim. (D.I. 20) The Court heard oral argument on the motion on August 10, 2016. (Transcript (D.I. 33) ("Tr.")) After the hearing, the Court ordered supplemental letter briefing on the impact, if any, of the decision of another judge of this Court in Plains All American Pipeline, L.P. v. Thomas Cook , 201 F.Supp.3d 547, 2016 WL 4414773 (D. Del. Aug. 16, 2016). (See D.I. 34)

For the reasons that follow, the Court will grant Defendants' motion.

II. BACKGROUND¹

Escheat is a procedure through which "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, 85 S.Ct. 626, 13 L.Ed.2d 596 (1965). Delaware's escheat law authorizes the State Escheator to claim unclaimed property and to conduct examinations of companies' books and records. See generally Del. Code Ann. tit. 12, § 1155 (2016).

Plaintiffs Marathon and Speedway are organized under Delaware law. (See D.I. 1 ¶¶ 5–6) In May 2007, Defendants began an audit of Marathon and Speedway's records in order to determine whether these entities had complied with Delaware's escheat law. (See id. ¶ 44) Using Kelmar Associates, LLC ("Kelmar"), an auditing firm, as their agent, Defendants requested "voluminous detailed financial records" covering a period of 35 years. (Id. ¶¶ 44–46)

At first, Plaintiffs cooperated with Defendants' audit. (See id. ¶ 46) Using documents produced in the audit by Marathon and Speedway, Defendants eventually issued a report "estimating a liability for unredeemed gift certificates in the amount of $8,231,049.20 for the period 1986 through 2000, even though gift certificates were issued [only] in 1987 through November 1999." (Id. ¶ 56 (emphasis omitted)) In response to this report, Plaintiffs wrote to Defendant Whitaker, Delaware's Audit Manager, to protest the estimate and to draw Defendants' attention to records showing that "no estimation was warranted or authorized." (Id. ¶¶ 63–64) In response, rather than revising their estimate, Defendants expanded the audit and requested "extensive detailed information" relating to the gift card business of MPC and SPC. (Id. ¶ 69) In response to this request, Plaintiffs produced documents to show that MPC and SPC are not Delaware entities but are, instead, Ohio limited liability companies. (Id. ¶ 70) Plaintiffs produced these documents in order to "show [ ] that Delaware lacks standing to claim any unredeemed gift cards, even if any exist." (Id. )

As a consequence of not receiving all of the documents Defendants sought relating to MPC and SPC (see id. ¶¶ 70–71, 73), Plaintiffs were sent a letter from Kelmar, which threatened enforcement action (see D.I. 23 at 1–2). The letter stated that continued failure to comply with the document request "will result in the Office [i.e., the State Escheator] referring the matter to the Attorney General's Office for consideration of enforcement action." (D.I. 1–2 Ex. A at 1)

Plaintiffs further allege: "The Attorney General is currently prosecuting a lawsuit against eighty-six defendants, including seventeen Delaware incorporated companies, under the Delaware False Claims Act seeking treble damages and attorneys' fees and costs, for failure of the Delaware incorporated entities to escheat unredeemed gift cards issued by third-party special purposes entities organized in other states." (D.I. 1 ¶ 76) (citing State ex rel. French v. Card Compliant, LLC , 2015 WL 11051006 (Del. Super. Ct. Nov. 23, 2015) )

Shortly after receiving the letter from Defendants, Plaintiffs filed their Complaint. In it, they allege that Defendants' actions and the DUPL are preempted by and in violation of federal common law and that Defendants' document requests constitute an unreasonable search in violation of the Fourth Amendment. (See id. ¶¶ 94, 104) Defendants seek declaratory and injunctive relief. (See id. ¶¶ 95, 105)

III. LEGAL STANDARDS

A. Failure to State a Claim Under Rule 12(b)(6)

Evaluating a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) requires the Court to accept as true all well-pleaded factual allegations of the complaint. See Spruill v. Gillis , 372 F.3d 218, 223 (3d Cir. 2004). "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." In re Burlington Coat Factory Sec. Litig. , 114 F.3d 1410, 1420 (3d Cir. 1997) (internal quotation marks omitted). Thus, the Court may grant such a motion to dismiss only if, after "accepting all well-pleaded allegations in the complaint as true, and viewing them in the light most favorable to plaintiff, plaintiff is not entitled to relief." Maio v. Aetna, Inc. , 221 F.3d 472, 482 (3d Cir. 2000) (internal quotation marks omitted).

However, "[t]o survive a motion to dismiss, a civil plaintiff must allege facts that ‘raise a right to relief above the speculative level on the assumption that the allegations in the complaint are true (even if doubtful in fact).’ " Victaulic Co. v. Tieman , 499 F.3d 227, 234 (3d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "The complaint must state enough facts to raise a reasonable expectation that discovery will reveal evidence of [each] necessary element" of a plaintiff's claim. Wilkerson v. New Media Tech. Charter Sch. Inc. , 522 F.3d 315, 321 (3d Cir. 2008) (internal quotation marks omitted). When evaluating a complaint, the Court may consider any documents or exhibits attached to or associated with the complaint. See Fed. R. Civ. P. 10(c) ; see also Pension Benefit Guar. Corp. v. White Consol. Indus. , 998 F.2d 1192, 1196 (3d Cir. 1993).

The Court is not obligated to accept as true "bald assertions," Morse v. Lower Merion Sch. Dist. , 132 F.3d 902. 906 (3d Cir. 1997), "unsupported conclusions and unwarranted inferences," Schuylkill Energy Res., Inc. v. Pennsylvania Power & Light Co. , 113 F.3d 405, 417 (3d Cir. 1997), or allegations that are "self-evidently false," Nami v. Fauver , 82 F.3d 63, 69 (3d Cir. 1996).

B. Lack of Subject Matter Jurisdiction and Ripeness Under Rule 12(b)(1)

In order for a federal court to exercise jurisdiction over a case, the case must be "ripe" for review. See Thompson v. Borough of Munhall , 44 Fed.Appx. 582, 583 (3d Cir. Aug. 13, 2002) ; see also Presbytery of N.J. of Orthodox Presbyterian Church v. Florio , 40 F.3d 1454, 1462 (3d Cir. 1994) ; Evanston Ins. Co. v. Layne Thomas Builders, Inc. , 635 F.Supp.2d 348, 352 (D. Del. 2009) (explaining that challenge to ripeness is "facial challenge to subject matter jurisdiction"). The purpose of the ripeness doctrine "is to prevent the courts ... from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties." Abbott Labs. v. Gardner , 387 U.S. 136, 148–49, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967).

Courts within the Third Circuit consider three factors when deciding whether an action is ripe for adjudication: "(1) the adversity of the parties' interests; (2) the probable conclusiveness of a judgment; and (3) the practical utility of judgment to the parties." Evanston Ins. Co. , 635 F.Supp.2d at 352–53 (citing Step–Saver Data Sys. Inc. v. Wyse Tech. , 912 F.2d 643, 647 (3d Cir. 1990) ); see also Md. Cas. Co. v. Pac. Coal & Oil Co. , 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941) (indicating that action for declaratory judgment is ripe if "the facts alleged ... show that there is a substantial controversy, between parties having adverse legal interests, of sufficient...