DE: Subpoena duces tecum from State Escheator was shown reasonable

A subpoena duces tecum from the State Escheator is subject to Fourth Amendment reasonableness. “The resulting legal framework for enforcing an administrative subpoena involves a shifting burden of proof. The agency has the initial burden of showing that its subpoena is authorized. ‘If the [agency] makes this preliminary showing, the burden then shifts to the respondent to prove that enforcement of the subpoena would be improper under the test enunciated in Powell.’” State, Dept. of Finance v. AT&T Inc., 2020 Del. Ch. LEXIS 233 (July 10, 2020):

Because the reasonableness analysis has traditionally been grounded in the Fourth Amendment, and because AT&T has sought to reserve its right to litigate issues under federal law and the United States Constitution in the Federal Action, this court could conclude that reasonableness is solely a federal law issue and decline to consider it on that basis. Under Powell, however, this court must evaluate whether the enforcement of the subpoena would be “an abuse of the court’s process,” 379 U.S. at 58, and the enforcement of an unreasonable subpoena would be abusive. In addition, the Escheat Law appears to contemplate an inquiry into reasonableness by stating that a subpoena may be issued “at reasonable times and on reasonable notice,” 12 Del. C. § 1171, and a leading authority on the Escheat Law observes that “[h]olders expect both the conduct and the review methodology employed by unclaimed property auditors to be reasonable ….” Ethan D. Millar et al., Unclaimed Property, Tax Portfolio Series (BNA) no. 1600-3d § 1600.09(F), Bloomberg Law (database updated June 2020). This decision therefore concludes that Delaware law contemplates an inquiry into the reasonableness of an administrative subpoena under the Escheat Law, albeit one that is deferential to the State Escheator.

The resulting legal framework for enforcing an administrative subpoena involves a shifting burden of proof. The agency has the initial burden of showing that its subpoena is authorized. “If the [agency] makes this preliminary showing, the burden then shifts to the respondent to prove that enforcement of the subpoena would be improper under the test enunciated in Powell.” Wheeling-Pittsburgh, 648 F.2d at 128. This decision has already discussed the McCarthy procedures, which parties ideally would use in these settings.

At bottom, AT&T maintains that the Subpoena exceeds the authority granted to the State Escheator. The Department bears the initial burden to show that it possesses the authority to issue the Subpoena. See Powell, 379 U.S. at 57-58. The allocation of the burden is not significant in this case, because the question of authority raises issues of law. The one exception is the question of whether the Subpoena is so broad, unreasonable, or otherwise infirm that it would constitute an abuse of the court’s process to enforce it. As to this issue, AT&T bears the burden. See LaSalle, 437 U.S. at 316.