IN THE COURT OF CHANCERY FOR THE STATE OF DELAWARE
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1 Case 1:15-cv RGA Document 43-1 Filed 12/11/15 Page 2 of 9 PageID #: 765 EFiled: Nov :18PM EST Transaction ID Case No IN THE COURT OF CHANCERY FOR THE STATE OF DELAWARE STATE OF DELAWARE, ) DEPARTMENT OF FINANCE ) ) Plaintiff, ) ) v. ) C.A. No. ) BLACKHAWK ENGAGEMENT ) SOLUTIONS (DE), INC., FORMERLY ) KNOWN AS PARAGO, INC., ) ) Defendant ) VERIFIED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF TO ENFORCE ADMINISTRATIVE SUMMONS The State of Delaware, Department of Finance (the State ) brings this action pursuant to the Delaware Escheats Law, 12 Del. C et. seq. (the Escheats Law ), which provides for abandoned and unclaimed property to be paid over to the State, to compel compliance with and restrain acts in violation of the Escheats Law. The State hereby alleges as follows: NATURE OF THE ACTION 1. On February 12, 2015, the State, acting through its duly appointed and acting State Escheator, David Gregor (the State Escheator ) issued an Administrative Summons (the Summons ) to Parago, Inc., now known as Blackhawk Engagement Solutions (DE), Inc. ( Parago ).
2 Case 1:15-cv RGA Document 43-1 Filed 12/11/15 Page 3 of 9 PageID #: The State is authorized by statute to issue summonses to further examinations to determine compliance with the Escheats Law. 12 Del. C Parago has not responded to the Summons. 4. The State seeks injunctive and declaratory relief against Parago to enforce compliance with the Summons. THE PARTIES 5. The Escheats Law provides that [t]here shall be an Escheator of the State, who shall be the Secretary of Finance or the Secretary s delegate. The administration and enforcement of [the Escheats Law] are vested in the Secretary of Finance or the Secretary s delegate. 12 Del. C Parago is a business entity initially organized and incorporated pursuant to the laws of the State of Delaware in 1999, the name of which was changed to Parago, Inc. in Blackhawk Network acquired all outstanding shares of Parago in 2014, after which the corporate name was changed to Blackhawk Engagement Solutions (DE). Parago s primary business location is 700 State Highway 121 Bypass, Ste. 200, Lewisville, Texas According to its website, Parago offers global rebate fulfillment capabilities to its more than 300 retail clients, including, without limitation, Ace Hardware, Bed, Bath & Beyond, Dell Computers, GE, Home Depot, LG, Macy s, Sprint, Staples, and Verizon
3 Case 1:15-cv RGA Document 43-1 Filed 12/11/15 Page 4 of 9 PageID #: Parago has been the subject of an unclaimed property examination by the State pursuant to 12 Del. C since February 18, JURISDICTION 9. The Court of Chancery has subject matter jurisdiction of this matter pursuant to 10 Del. C. 341 and 343. Further, the General Assembly has designated that the Court of Chancery has jurisdiction over the State Escheator s administration of the Escheats Law. 10. The State is authorized to bring an action against a holder of unclaimed property in the Court of Chancery to enforce payment or delivery of the State Escheator s assessment of an unclaimed property liability. 12 Del. C. 1156(k). 11. A presumptive holder of unclaimed property is authorized to bring an action in the Court of Chancery to appeal an administrative determination of an assessment of liability by the Department of Finance, 12 Del. C. 1156(j), or to appeal the assessment by the State Escheator of penalties and interest on a liability. 12 Del. C. 1156(l). 12. A presumptive owner of unclaimed property is authorized to bring an action in the Court of Chancery to appeal an administrative determination of the satisfaction of an unclaimed property claim by the State Escheator. 12 Del. C
4 Case 1:15-cv RGA Document 43-1 Filed 12/11/15 Page 5 of 9 PageID #: Although there is no express assignment of jurisdiction to the Court of Chancery in the instant matter, because the Court of Chancery would have jurisdiction over any future controversy in this action, in the interest of judicial economy, the Court of Chancery is best situated to rule on the State s request. 14. Pursuant to Delaware s Escheats Law, a holder of abandoned property holds such property as a fiduciary for the rightful owner of the property. The State collects abandoned property from holders and holds it until the State can reunite such unclaimed property with rightful owners. In the interim, the State holds the property as a fiduciary and is authorized to use the property for the benefit of the public. 15. This court has jurisdiction over the Plaintiff's request for a declaratory judgment pursuant to its equitable cleanup jurisdiction. 16. This Court has personal jurisdiction over Parago pursuant to 10 Del. C FACTUAL ALLEGATIONS 17. The purpose of examinations conducted by the State pursuant to the Escheats Law is to identify abandoned and unclaimed property in the custody of a holder who is subject to the State s jurisdiction, to which the State is entitled to custody until the property is claimed by its rightful owner
5 Case 1:15-cv RGA Document 43-1 Filed 12/11/15 Page 6 of 9 PageID #: Any entity doing business in the State or formed or incorporated pursuant to the laws of the State is a potential holder of unclaimed property. 19. The State has statutory authority to examine a holder s records to determine its compliance with the Delaware Escheats Law. 12 Del. C. 1155(a). 20. The State may by summons require the attendance of any person having knowledge in the premises, and may take testimony and require proof material for the investigation. Id. 21. The State Escheator issued a notice of examination to Parago on February 18, 2011, indicating that the State would examine the books and records of Parago to determine its compliance with the Escheats Law. A copy of the notice of examination is attached hereto as Exhibit A. 22. Parago has refused to fully cooperate with the State Escheator and has interfered with the State s ability to exercise its statutory right to examine Parago s records to determine whether Parago holds any abandoned and unclaimed property from the rebate programs Parago administered. 23. On February 12, 2015, the State issued a Summons pursuant to 12 Del. C seeking sworn testimony and the production of [d]ocuments related to uncashed rebate check payments that were either (a) returned to its Client Companies (by way of check, wire, Automated Clearing House Payment, or credit memorandum) or (b) subject to an express per-transaction fee discount to its Client - 5 -
6 Case 1:15-cv RGA Document 43-1 Filed 12/11/15 Page 7 of 9 PageID #: 770 Companies representing anticipated slippage. A copy of the Summons is attached hereto as Exhibit B. 24. Parago has not responded to the Summons, other than to indicate that it will not comply without an Order from this Court directing it to do so. COUNT I: VIOLATION OF THE DELAWARE ESCHEATS LAW 25. The State incorporates by reference all the foregoing paragraphs above as though fully set forth herein. 26. Parago violated the Escheats Law by (i) failing to provide the State with the information requested to enable the State to perform an examination and (ii) failing to respond to the Administrative Summons issued by the State Escheator pursuant to 12 Del. C. 1155(a) on February 12, The State seeks injunctive relief prohibiting Parago from continuing to engage in these unlawful activities and enforcing the Summons previously issued. 28. The State seeks an order stating that Parago is subject to the Escheats Law, and that Parago must comply with the Summons. COUNT II: INJUNCTIVE RELIEF 29. The State incorporates by reference all the foregoing paragraphs above as though fully set forth herein
7 Case 1:15-cv RGA Document 43-1 Filed 12/11/15 Page 8 of 9 PageID #: The State has no plain, adequate, or speedy remedy at law, and will suffer significant, permanent, and irreparable harm if a permanent injunction is not entered enjoining Parago from continuing to disregard the Escheats Law and refusing to allow the State to perform its statutorily-authorized examination of Parago. 31. The State is entitled to injunctive relief directing Parago to comply with the Escheats Law and respond to the Summons. COUNT III: DECLARATORY JUDGMENT 32. The State incorporates by reference all the foregoing paragraphs above as though fully set forth herein. 33. The Delaware Declaratory Judgment Act gives courts the "power to declare rights, status and other legal relations whether or not further relief is or could be claimed." 10 Del. C The State is entitled to declaratory judgment establishing, among other things, the following: (a) Parago is subject to the Escheats Law; (b) the State has a fiduciary duty to enforce the Escheats Law; (c) there is a legitimate public interest in the State s enforcement of the Escheats Law; (d) the State properly and lawfully issued the Summons pursuant to 12 Del. C. 1155(a); and (e) Parago has no legal authority to disregard the Summons, but must respond and comply with the Escheats Law to the best of its ability
8 Case 1:15-cv RGA Document 43-1 Filed 12/11/15 Page 9 of 9 PageID #: 772 PRAYER FOR RELIEF WHEREFORE, Plaintiffs request the following relief: 1. A permanent injunction (a) restraining Parago from engaging in its continued unlawful disregard of the Escheats Law, and (b) compelling the delivery by Parago of the requested information to the State; and 2. An order establishing that (a) Parago is subject to the Escheats Law; (b) the State has a fiduciary duty to enforce the Escheats Law; (c) there is a legitimate public interest in the State s enforcement of the Escheats Law; (d) the State properly and lawfully issued the Summons pursuant to 12 Del. C. 1155(a); and (e) Parago has no legal authority to disregard the Summons; 3. Such other and further relief as the Court may deem just and proper. STATE OF DELAWARE DEPARTMENT OF JUSTICE /s/ Caroline Lee Cross Caroline Lee Cross (DE ID 3489) Jennifer Noel (DE ID 3987) Carvel State Office Building 820 N. French St., 6 th Floor Wilmington, DE Telephone: (302) Fax: (302) caroline.cross@state.de.us Dated: November 20, 2015 Counsel for STATE OF DELAWARE, DEPARTMENT OF FINANCE
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