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Federal Court Denies Delaware's Motion to Dismiss in Vial v. Mayrack Escheat Case

Published
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10

Why it matters

On March 23, Delaware's federal district court rejected the state's motion to dismiss in Vial v. Mayrack, clearing the way for a constitutional challenge to Delaware's escheatment practices. Jaime Vial, a Chilean national representing an estate, claims Delaware unlawfully seized and liquidated stock shares worth approximately $13.6 million, paying him only $2.6 million based on liquidation value rather than market value at the time of escheatment. The court found Vial adequately alleged a Fifth Amendment takings violation and a Fourteenth Amendment due process injury, rejecting Delaware's arguments on standing, immunity, and the characterization of escheatment as distinct from a taking. The decision cites Tyler v. Hennepin County, the Supreme Court's 2023 ruling that property seizures can constitute compensable takings even when authorized by state law.

The case builds on a pattern of constitutional challenges to Delaware's aggressive escheat program, which generates roughly 7 percent of the state's annual budget. Vial discovered additional escheated shares after filing an initial claim, suggesting gaps in notice procedures. Prior litigation—including 2016's Temple-Inland v. Cook—has challenged Delaware's estimation methods as violating due process, and ongoing suits allege improper seizure of foreign assets. The court's willingness to allow damages claims for liquidated securities to proceed is unusual; states have historically shielded themselves through Eleventh Amendment immunity, though procedural claims have occasionally survived.

Attorneys representing clients with Delaware escheatment disputes should monitor this case closely. A ruling for Vial could expose Delaware to significant damages liability and force policy changes around notice periods and valuation methods. The decision also signals judicial openness to constitutional claims that prior courts had dismissed as foreclosed by state sovereign immunity, potentially affecting escheatment practices nationwide as other states face similar audits and litigation.

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