defendants answer and affirmative defenses

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

CA, INC.,

Plaintiff,

v.

RICHARD S. CORDREY, in his capacity as the Delaware Secretary of Finance and the Delaware State Escheator; PATRICK T. CARTER, in his capacity as the Director of the Division of Revenue, and the DEPARTMENT OF FINANCE, DIVISION OF REVENUE FOR THE STATE OF DELAWARE,

Defendants.

:::::::::::::::

C.A. No. 4111-CC

DEFENDANTS' ANSWER

AND AFFIRMATIVE DEFENSES

Defendants Richard S. Cordrey, in his capacity as the Delaware Secretary

of Finance and the Delaware State Escheator, Patrick T. Carter, in his capacity as the

Director of the Division of Revenue, and the Department of Finance, Division of

Revenue for the State of Delaware (collectively, "the State"), by and through their

undersigned counsel, respond to the allegations of the First Amended Verified Complaint

for Equitable, Declaratory, Injunctive, and Other Relief (the "Amended Complaint") as

follows:

1. The State denies the allegations contained in sentence 1 of

paragraph 1 of the Amended Complaint, except admits that CA, Inc. ("CA") purports to

be bringing an action against the State raising the issues referenced in sentence 1. The

State also denies the allegations contained in sentence 2 of paragraph 1 of the Amended

EFiled: Jan 12 2009 5:45PM EST Transaction ID 23272352 Case No. 4111-CC

From the state tax library of Reed Smith LLP www.reedsmith.com/DEtax for other related documents, please email [email protected]

2

Complaint, except admits that the State has exercised its statutory right to assess interest

and audit CA. 12 Del. C. § 1159(d); 12 Del. C. § 1155. Additionally, the State denies

the allegations contained in sentences 3 and 4 of paragraph 1 of the Amended Complaint

on the ground that they contain conclusions of law to which no response is required. To

the extent the allegations are not conclusions of law, the State denies the allegations

contained in sentences 3 and 4 of paragraph 1 of the Amended Complaint.

2. Admitted.

3. Admitted.

4. Admitted.

5. Admitted.

6. Admitted.

7. The State denies the allegations contained in paragraph 7 of the

Amended Complaint on the ground that they contain conclusions of law to which no

response is required. To the extent a response is required, the State denies the allegations

contained in paragraph 7 of the Amended Complaint because the Court lacks subject

matter jurisdiction over CA's claims.




contained in paragraph 8 of the Amended Complaint because the Court lacks subject

matter jurisdiction over CA's claims.


3


Amended Complaint, except admits that the State oversees and regulates the reporting

and processing of unclaimed and abandoned property owed to the State, including

pursuant to Delaware's Abandoned or Unclaimed Property Law, 12 Del. C. §§ 1101-1224

("Abandoned Property Law").

10. Admitted.


Amended Complaint, except admits that Delaware has a Voluntary Disclosure Program

(the "VDA Program"), and respectfully refers the Court to the Division of Revenue's

Regulations (the "Regulations") for a complete and accurate description of the State's

VDA Program.


Amended Complaint, and respectfully refers the Court to the Regulations for a complete

and accurate description of the State's VDA Program.

13. The State denies the allegations contained in sentence 1 of

paragraph 13 of the Amended Complaint. The State also denies the allegations contained

in sentences 2 and 3 of paragraph 13 of the Amended Complaint, except admits that Form

AP DE-1, Disclosure and Notice of Intent to Voluntarily Comply with Abandoned

Property Law (the "Notice of Intent"), and Form AP DE-2, Voluntary Self Disclosure

Agreement (the "VDA Agreement") are form documents that may be used in connection

with the VDA Program. The State respectfully refers the Court to the Notice of Intent

and the VDA Agreement for a complete and accurate description of their contents. The


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State denies the allegations contained in sentence 4 of paragraph 13 of the Amended

Complaint.


Amended Complaint, except admits that on November 17, 2004, CA faxed to the State a

signed Notice of Intent, dated November 8, 2004, admitting that it had not complied with

the Abandoned Property Law for a period of at least thirteen years.


Amended Complaint, except admits that on November 17, 2004, CA faxed to the State a

signed Notice of Intent, dated November 8, 2004, where CA admitted that it had not

complied with the Abandoned Property Law for a period of at least thirteen years. The

State respectfully refers the Court to the document referred to in paragraph 15 of the

Amended Complaint for a complete and accurate description of its contents.


Amended Complaint, except admits that the Notice of Intent imposes certain

requirements on a holder, and respectfully refers the Court to the document referred to in

paragraph 16 of the Amended Complaint for a complete and accurate description of its

contents.

17. Denied.

18. Denied.


Amended Complaint, and respectfully refers the Court to the Form AP DE-2 referred to


5

in paragraph 19 of the Amended Complaint for a complete and accurate description of its

contents.


Amended Complaint, and respectfully refers the Court to the Regulations and the

documents referred to in paragraph 20 of the Amended Complaint for a complete and

accurate description of their contents.

21. Denied.

22. The State lacks the knowledge or information sufficient to form a

belief as to the truth of the allegations contained in paragraph 22 of the Amended

Complaint and denies them on that basis, except admits that CA retained Abandoned

Property Services LLC to conduct CA's self-audit.



Complaint and denies them on that basis.



Complaint and denies them on that basis.


Amended Complaint, except admits that on May 16, 2005, CA requested additional time

to complete its self-audit, which the State provided with the understanding that the matter

would be resolved promptly.


6


Amended Complaint, except admits that on July 28, 2005, APS met with the State to

identify the amount that CA claimed it owed the State for the more than thirteen years it

violated the Abandoned Property Law.


Amended Complaint, except admits that the State requested additional information and/or

materials from CA, and that CA did not comply with that request.

28. Denied.


Amended Complaint, except admits that the State's Audit Manager, as well as other State

personnel, reviewed CA's submissions.


Amended Complaint, and respectfully refers the Court to the April 18, 2006,

correspondence sent by the State to CA that is referred to in paragraph 30 of the

Amended Complaint for a complete and accurate description of its contents.


Amended Complaint, except admits that on August 7, 2007, CA sent the State a revised

liability amount of $2,323,880.08, an increase of $1,639,844.14 over its original July

2005 report of liability.


Amended Complaint, except admits that on August 7, 2007, CA sent the State a revised


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liability amount of $2,323,880.08, an increase of $1,639,844.14 over its original July

2005 report of liability.


Amended Complaint, except admits that the State continued to request additional

information from CA concerning, among other things, CA's accounts receivable and

acquisitions, which CA had not provided to the State.

34. Denied.


Amended Complaint, and respectfully refers the Court to the documents referred to in

paragraph 35 of the Amended Complaint for a complete and accurate description of their

contents.


Amended Complaint, and respectfully refers the Court to the document referred to in


contents.


Amended Complaint, except admits that the State had not yet issued a formal request for

payment or a formal request for an audit review, and respectfully refers the Court to the

Regulations and the documents referred to in paragraph 37 for a complete and accurate

description of their contents.




8


contents.




contents.




contents.


Amended Complaint on the ground that it lacks the knowledge or information sufficient

to form a belief as to the truth of the allegations and denies them on that basis, except

admits that CA purports to dispute the State's use of estimates in the calculation of CA's

abandoned property liability.

42. Denied.



response is required. To the extent a response is required, the allegations are denied.

Moreover, the State lacks the knowledge or information sufficient to form a belief as to

the truth of the allegation about "the remaining amounts" referenced in paragraph 43 of

the Amended Complaint, and further denies that allegation on that basis.


9

44. Denied.


Amended Complaint, except admits that CA has refused to pay the abandoned property it

owes to the State.


Amended Complaint, except admits that on June 3, 2008, the State made a formal request

to CA for payment of $6,794,539.20 in past-due liability and $1,423,880.26 in interest

accrued as of that date, for a total of $8,218,410.46. The State respectfully refers the

Court to the document referred to in paragraph 46 of the Amended Complaint for a

complete and accurate description of its contents.


Amended Complaint, and respectfully refers the Court to the communication referenced

in that paragraph for a complete and accurate description of its contents.


Amended Complaint, except admits that the State calculated the amount CA owes to the

State based on its review of the information provided to the State by APS on CA's behalf.


Amended Complaint, except admits that the State had not yet issued a formal request for

an audit review at this time.


Amended Complaint, except admits that the State's June 3, 2008 letter included a formal

request for $1,423,880.26 in interest pursuant to 12 Del. C. § 1159(d). The State


10

respectfully refers the Court to the document referred to in paragraph 50 of the Amended

Complaint for a complete and accurate description of its contents.


Amended Complaint, except admits that the State's June 3, 2008 letter does not expressly

cite to the Regulations, and respectfully refers the Court to the Regulations and the

document referred to in paragraph 51 of the Amended Complaint for a complete and





contents.


Amended Complaint, except admits that the State's June 3, 2008 letter does not expressly

cite to the Regulations, and respectfully refers the Court to the Regulations and the




Amended Complaint, except admits that the State did not request additional information

from CA in the referenced correspondence, and respectfully refers the Court to the


accurate description of its contents.


11


Amended Complaint, except admits that the State did not request additional information

from CA in the referenced correspondence, and respectfully refers the Court to the




Amended Complaint, except admits that on June 26, 2008, CA sent a letter purporting to

dispute the State's formal request for payment, and refusing to make payment of the

amount requested by the State. The State respectfully refers the Court to the document

referred to in paragraph 56 of the Amended Complaint for a complete and accurate

description of its contents.




contents.

58. Denied.

59. Denied.

60. Denied.


Amended Complaint, except admits that CA has failed to make payment to the State in

compliance with the Abandoned Property Law.


12


Amended Complaint, except admits that it exercised its statutory right to formally request

an audit of CA pursuant to 12 Del. C. § 1155. The State respectfully refers the Court to

the document referred to in paragraph 62 of the Amended Complaint for a complete and





contents.





65. Denied.

66. Denied.

67. Denied.



Complaint and denies them on that basis. To the extent a response is required, the State

denies the allegations contained in paragraph 68 of the Amended Complaint.




13















73. Denied.


Amended Complaint, except admits that the State has not accepted the conditional

payment offered by CA, which is substantially less than the amount determined by the

State that CA owes, and that the State exercised its statutory authority pursuant to 12 Del.

C. § 1159(d) to assess interest.


14


Amended Complaint, except admits that a VDA Agreement was never executed by either

CA or the State.

76. Denied.

77. Denied.

78. Denied.

79. Denied.


Amended Complaint, except admits that on June 3, 2008, the State made a formal request

to CA for payment of $6,794,539.20 in past-due liability and $1,423,880.26 in interest

accrued as of that date, for a total of $8,218,410.46. The State respectfully refers the




Amended Complaint, except admits that on June 26, 2008, CA sent a letter disputing the

State's formal request for payment, and claiming that it owed $3,585,978 for all

abandoned property liability for the periods 1991-2001. The State respectfully refers the




Amended Complaint, except admits that there is a difference of $4,632,432.46 between


15

the State's June 3, 2008 request for payment (inclusive of interest) and the amount CA

claims it owes.



response is required.



response is required.

85. Denied.

86. The State denies the allegations in paragraph 86 of the Amended

Complaint on the ground that they contain conclusions of law to which no response is

required.



response is required. To the extent the allegations are not conclusions of law, the State




response is required. To the extent the allegations are not conclusions of law, the State



16

COUNT I

Statutory Cause of Action – 12 Del. C. § 1156(b)

89. The State reasserts and incorporates by reference herein all

responses to the preceding paragraphs.



response is required. The State respectfully refers the Court to 12 Del. C. § 1156(b) for a


91. Denied.

92. Denied.

93. Denied.


Amended Complaint, except admits that it exercised its statutory right under 12 Del. C.

§ 1159(d) to assess interest.

95. Denied.

96. Denied.

97. Denied.

COUNT II

Declaratory Relief Pursuant to 10 Del. C. § 6501 et seq.



99. Denied.


17

100. Denied.

101. Denied.

102. Denied.

103. Denied.

104. Denied.

105. Denied.

106. Denied.

107. Denied.

108. Denied.

109. Denied.

110. Denied.

111. Denied.


Amended Complaint, and CA's request for relief should be denied.


Amended Complaint, and the subparts thereof, and CA's request for relief should be

denied.

COUNT III

Injunctive Relief



115. Denied.


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116. Denied.

117. Denied.


Amended Complaint, and respectfully refers the Court to the Regulations for a complete

and accurate description of the State's VDA Program.

119. Denied.

120. Denied.


Amended Complaint, except admits that the State concluded its review of the information

provided by CA, and, based on that information, determined that CA understated its

liability and owes a substantially larger amount to the State.

122. Denied.

123. Denied.

124. Denied.

125. Denied.








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contained in paragraph 127, and CA's request for relief should be denied.

128. Denied.



COUNT IV

Specific Performance



131. Denied.







requirements on a holder, and respectfully refers the Court to the Regulations and the






20




Amended Complaint, except admits that CA retained an outside auditor, provided a

limited number of documents to the State regarding the self-audit, continually changed its

estimates of the amount owed to the State, and never paid the State the money it owes for

the more than thirteen years it violated the Abandoned Property Law.

136. Denied.



138. Denied.

COUNT V

Promissory Estoppel



140. Denied.

141. Denied.

142. Denied.

143. Denied.

144. Denied.




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COUNT VI

Breach of Agreement



147. Denied.

148. Denied.



requirements on a holder, and respectfully refers the Court to the Regulations and the







151. Denied.

152. Denied.

153. Denied.

COUNT VII

Breach of Agreement Through Breach of the Implied Covenant of Good Faith and Fair Dealing




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155. Denied.



response is required. To the extent a response is required, the State denies the allegations,

and respectfully refers the Court to the Regulations and the documents referred to in

paragraph 156 of the Amended Complaint for a complete and accurate description of

their contents.

157. Denied.

158. Denied.

COUNT VIII

Declaratory Judgment – Unconstitutionality of 29 Del. C. § 10161 and Title 12,Chapter 11 of the Delaware Code as to Individual Defendants




Amended Complaint on the ground that the State's attempt to collect abandoned property

from CA pursuant to the Abandoned Property Law does not deprive CA of due process of

law.




law.

162. Denied.


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163. Denied.




law.




law.

166. Denied.

167. Denied.

168. Denied.

169. Denied.

170. Denied.

171. Denied.

172. Denied.



response is required. To the extent an answer is required, the State denies the allegation

that the State has waived sovereign immunity.




24


law, and CA's request for relief should be denied.

COUNT IX

Injunctive Relief – Unconstitutionality of 29 Del. C. § 10161 and Title 12,Chapter 11 of the Delaware Code as to Individual Defendants






law.




law.

178. Denied.

179. Denied.




law.




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law.

182. Denied.

183. Denied.




law.

185. Denied.








contained in paragraph 187, and CA's request for relief should be denied.






26

AFFIRMATIVE DEFENSES

FIRST AFFIRMATIVE DEFENSE

CA's claims are barred by the doctrine of sovereign immunity.

SECOND AFFIRMATIVE DEFENSE

The Court of Chancery lacks subject matter jurisdiction.

THIRD AFFIRMATIVE DEFENSE

The Plaintiff lacks standing to pursue its claims.

FOURTH AFFIRMATIVE DEFENSE

The Amended Complaint fails to state a claim upon which relief can be

granted.

FIFTH AFFIRMATIVE DEFENSE

CA has violated Delaware's Abandoned Property Law, including 12 Del.

C. §§ 1101-1224.

SIXTH AFFIRMATIVE DEFENSE

CA's refusal to comply with Delaware law was the cause of injury, loss, or

damage complained of by CA.

SEVENTH AFFIRMATIVE DEFENSE

CA's claims are barred by the doctrine of unclean hands.

EIGHTH AFFIRMATIVE DEFENSE

Some or all of CA's equitable claims, including estoppel, and equitable

defenses may not be asserted against the State.


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NINTH AFFIRMATIVE DEFENSE

CA is not entitled to the relief requested in the Amended Complaint.

TENTH AFFIRMATIVE DEFENSE

The Amended Complaint is redundant and should be dismissed because it

duplicates the allegations made as a counterclaim in the State's Action entitled Cordrey v.

CA, Inc., C.A. No. 4195-CC, creating unnecessary burden and cost for the parties and the

Court.

ELEVENTH AFFIRMATIVE DEFENSE

CA has not been denied due process of law.

TWELFTH AFFIRMATIVE DEFENSE

The State affirmatively raises and reserves all applicable equitable

defenses.

THIRTEENTH AFFIRMATIVE DEFENSE

At this time, the Amended Complaint does not describe the claims made

against the State with sufficient particularity to allow the State to determine all the

defenses, and the State therefore lacks sufficient knowledge to form a belief as to the

existence and availability of additional affirmative defenses. The State reserves the right

to assert additional affirmative defenses as it discovers them through discovery and other

investigation.

FOURTEENTH AFFIRMATIVE DEFENSE

At all relevant times, the State acted in good faith and with justification.


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561572-Wilmington Server 1A - MSW

FIFTEENTH AFFIRMATIVE DEFENSE

At all times, the State acted in accordance with the Abandoned Property

Law, the Regulations and the other applicable laws of the State.

WHEREFORE, the State respectfully requests the Court to enter an order:

a. Dismissing the Amended Complaint with prejudice;

b. Awarding the State its reasonable attorneys' and professionals' fees,

expenses and costs; and

c. Awarding such other relief as the Court deems just and proper.

/s/ Lawrence W. Lewis

Lawrence W. Lewis (I.D. No. 2539) State Solicitor John S. McDaniel (I.D. No. 2477) Deputy Attorney General Delaware Dept. of Justice 820 N. French St. Wilmington, Delaware 19801 Tel.: (302) 577-8400

DATED: January 12, 2009

Respectfully submitted,

/s/ Edward B. Micheletti

Edward P. Welch (I.D. No. 671) Edward B. Micheletti (I.D. No. 3794) Rachel J. Barnett (I.D. No. 4876)SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP One Rodney Square P.O. Box 636 Wilmington, Delaware 19899-0636 Tel.: (302) 651-3000

Attorneys for Defendants Richard S. Cordrey,

Patrick T. Carter, and the Department of

Finance, Division of Revenue for the State of

Delaware


defendants answer and affirmative defenses

Documents