Plains All American Pipeline L v. Thomas Cook , 866 F.3d 534 ( 2017 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______
No. 16-3631
______
PLAINS ALL AMERICAN PIPELINE L.P.,
Appellant
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;
MICHELLE M. WHITAKER, in her capacity as the
Audit Manager for the State of Delaware;
KELMAR ASSOCIATES LLC
______
On Appeal from the United States District Court
for the District of Delaware
(District Court No. 1-15-cv-00468)
District Judge: Honorable Richard G. Andrews
______
Argued April 5, 2017
Before: CHAGARES, SCIRICA, and FISHER,
Circuit Judges
(Opinion Filed: August 9, 2017)
Phillip B. Dye, Jr.
Deborah C. Milner
Vinson & Elkins
1001 Fannin Street
Suite 2300
Houston, TX 77002
Jeremy C. Marwell ARGUED
Christian D. Sheehan
Vinson & Elkins
2200 Pennsylvania Avenue, N.W.
Suite 500 West
Washington, DC 20037
James E. O'Neill, III
Colin R. Robinson
Bradford J. Sandler
Pachulski Stang Ziehl & Jones
919 North Market Street
P.O. Box 8705, 17th Floor
Wilmington, DE 19801
Attorneys for Appellant
2
Caroline L. Cross
Jennifer R. Noel
Delaware Department of Justice
820 North French Street
Wilmington, DE 19801
Marc S. Cohen
Loeb & Loeb
10100 Santa Monica Boulevard
Suite 2200
Los Angeles, CA 90067
Tiffany R. Moseley
Steven S. Rosenthal ARGUED
John D. Taliaferro
Loeb & Loeb
901 New York Avenue, N.W.
Suite 300 East
Washington, DC 20001
Attorneys for Appellees Thomas Cook, David M.
Gregor and Michelle M. Whitaker
Marc J. Phillips
Manion Gaynor & Manning
1007 North Orange Street, Tenth Floor
Wilmington, DE 19801
3
Stephen W. Kidder
Ryan P. McManus ARGUED
Hemenway & Barnes
75 State Street, 16th Floor
Boston, MA 02109
Attorneys for Appellee Kelmar Associates LLC
______
OPINION OF THE COURT
______
FISHER, Circuit Judge.
All states have laws authorizing them to seize private
property through escheat, “a procedure with ancient origins
whereby 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 (1965). But in recent years,
state escheat laws have come under assault for being
exploited to raise revenue rather than reunite abandoned
property with its owners. Delaware’s Escheats, or Unclaimed
Property, Law is no exception; as unclaimed property has
become Delaware’s third-largest source of revenue,
companies have brought a wave of lawsuits challenging the
constitutionality of Delaware’s escheat regime.
4
In this case, Plains All American Pipeline (“Plains”)
seeks to attack the constitutionality of several provisions of
the Delaware Escheats Law, as well as Delaware’s demand
that it submit to an abandoned property audit. But because
Plains brought suit before Delaware assessed liability based
on its audit or sought a subpoena to make its audit-related
document requests enforceable, the District Court dismissed
the suit, finding that Plains’s claims were unripe except for an
equal protection claim that it dismissed for failure to state a
claim. Although we disagree with the District Court that
Plains’s as-applied, procedural due process claim is unripe
and will therefore reverse and remand in part, we will affirm
the District Court’s dismissal in all other respects.
I
A
Rooted in a practice that dates back to feudal times,
Delaware’s Escheats Law is the mechanism by which
Delaware takes custody of abandoned property in the State.
As amended,1 the law provides that a holder of “property
presumed abandoned” must file a yearly report with the State
Escheator in which it provides information about the property
1
Delaware amended its Escheats Law while this case
was being briefed. Effective February 2, 2017, the
amendments adopt some meaningful changes, like limiting
the look-back period of audits and expressly granting
Delaware subpoena power to enforce audits. For ease of
reference, we will cite to the new version of the statute, given
that the basic framework of the law remains unchanged. In so
doing, we express no opinion on whether the amendments
would apply retroactively to the Plains audit as they do not
affect our analysis.
5
and its possible owner. Del. Code Ann. tit. 12, §§ 1142, 1143.
When filing the yearly report, the holder must “pay or deliver
. . . the property described in the report” to the State
Escheator, id. § 1152, who then takes custody of the property
and may sell it.
To ensure compliance with the law, the statute permits
the Escheator to “[e]xamine the records of a person or the
records in the possession of an agent, representative,
subsidiary, or affiliate of the person under examination in
order to determine whether the person complied with this
chapter.” Id. § 1171(1). And the “State Escheator may
contract” with private third-parties to perform this audit on
his or her behalf. Id. § 1178(a). If the person subject to
examination “does not retain the records required,” the “State
Escheator may determine the amount of property due using a
reasonable method of estimation.” Id. § 1176(a). And if the
State Escheator completes its examination and “determines
that a holder has underreported unclaimed property due and
owing,” the State Escheator “shall mail a statement of
findings and request for payment to the holder that filed.” Id.
§ 1179(a). When liability is assessed, the State may charge
interest and penalties. Id. § 1183. But the holder of the
abandoned property may seek judicial review of the
Escheator’s decision in the Court of Chancery. Id. § 1179(b).
B
On October 22, 2014, Delaware’s Audit Manager,
Michelle Whitaker, sent Plains a notice that the State intended
to audit its records from 1986 through present to evaluate its
compliance with Delaware’s Escheats Law. In that notice,
Whitaker informed Plains that Kelmar Associates, a private
auditing firm that conducts a large percentage of Delaware’s
unclaimed property audits, would conduct the audit; that she
6
was “the final arbiter of any disputes that may arise during the
course of the examination”; and that the audit would be
expanded back to 1981 if not completed by June 30, 2015.
J.A. 200.
After Kelmar sent Plains its initial document requests,
Plains sent a letter raising several constitutional objections to
the audit and informing Whitaker that it would not respond to
Kelmar. Dismissing Plains’s concerns as unfounded,
Whitaker responded that multistate audits were common and
Delaware’s actions were legal. She directed Plains to
“produce the records requested” by Kelmar and noted that
“the State will consider the level of [Plains’s] cooperation
when determining whether penalties should be assessed, or
whether any other statutorily available actions should be
taken, in connection with any past due unclaimed property
that is identified as a result of the examination.” J.A. 325.
Plains did not respond to Whitaker. Instead, it sued
Kelmar, Whitaker, Delaware Secretary of Finance Thomas
Cook, and Delaware State Escheator David Gregor in federal
court for a declaration that the proposed audit violated the
Constitution, an injunction preventing the defendants from
pursuing the audit, and attorney’s fees. In its initial complaint,
Plains alleged that the proposed audit and portions of
Delaware’s Escheats Law violated the Fourth Amendment, as
well as the Ex Post Facto, Due Process, Equal Protection, and
Takings Clauses of the Constitution. But Plains later amended
its complaint to add one claim that Kelmar conspired with
Delaware to violate its rights and two claims that Delaware’s
Escheats Law was void for vagueness and preempted by
federal law.
In July 2015, the Defendants moved to dismiss the
amended complaint under Federal Rules of Civil Procedure
7
12(b)(1) and 12(b)(6). The District Court dismissed this case
on August 16, 2016, finding that Plains’s claims were all
unripe except for an equal protection claim that it dismissed
for failure to state a claim. This timely appeal followed.
II
The District Court had federal question jurisdiction
under 28 U.S.C. § 1331. We have jurisdiction under 28
U.S.C. § 1291. We exercise plenary review over both a
district court’s dismissal for lack of ripeness, NE Hub
Partners, L.P. v. CNG Transmission Corp., 239 F.3d 333, 341
(3d Cir. 2001), and its dismissal for failure to state a claim
under Rule 12(b)(6), Monroe v. Beard, 536 F.3d 198, 205 (3d
Cir. 2008). Where, as here, the defendants move to dismiss a
complaint under Rule 12(b)(1) for failure to allege subject
matter jurisdiction, we treat the allegations in the complaint
as true and draw all reasonable inferences in favor of the
plaintiff. NE Hub, 239 F.3d at 341.
III
On appeal, Plains argues that the District Court
improperly dismissed six of its claims—four facial challenges
and two as-applied challenges—as unripe.2 This assertion
2
In addition to dismissing the six appealed claims, the
District Court also dismissed Kelmar from the suit, and
Plains’s Equal Protection, Ex Post Facto, and Takings Clause
claims. It is well settled that an issue is waived and need not
be addressed where, as here, the appellant “did not include
any argument with respect to [it] or otherwise explain how
the District Court erred.” Free Speech Coal., Inc. v. Att’y
Gen. of United States, 677 F.3d 519, 545 (3d Cir. 2012). We
will accordingly affirm those dismissals.
8
requires us to consider whether Plains has presented a
justiciable case or controversy.
A
While it is “emphatically the province and duty of the
judicial department to say what the law is,” Marbury v.
Madison, 5 U.S. (1 Cranch) 137, 177 (1803), Article III of the
Constitution limits the federal judiciary’s authority to exercise
its “judicial Power” to “Cases” and “Controversies.” U.S.
Const. art. III, § 2. This case-or-controversy limitation, in
turn, is crucial in “ensuring that the Federal Judiciary respects
the proper—and properly limited—role of the courts in a
democratic society.” DaimlerChrysler Corp. v. Cuno, 547
U.S. 332, 341 (2006) (internal quotation marks omitted). And
courts enforce it “through the several justiciability doctrines
that cluster about Article III,” including “standing, ripeness,
mootness, the political-question doctrine, and the prohibition
on advisory opinions.” Toll Bros., Inc. v. Twp. of Readington,
555 F.3d 131, 137 (3d Cir. 2009) (internal quotation marks
omitted).
As the District Court noted, this case involves
ripeness, “a matter of degree whose threshold is notoriously
hard to pinpoint.” NE Hub, 239 F.3d at 341. But because
Plains is bringing a preenforcement action, the justiciability
issue in this case can equally be described in terms of
standing. See, e.g., MedImmune, Inc. v. Genetech, Inc., 549
U.S. 118, 128 n.8 (2007) (“The justiciability problem that
arises, when the party seeking declaratory relief is himself
preventing the complained-of injury from occurring, can be
described in terms of standing . . . or . . . ripeness”); Free
Speech Coal., Inc. v. Att’y Gen. of United States, 825 F.3d
149, 167 n.15 (3d Cir. 2016) (“[W]hether Plaintiffs have
standing or their claims are ripe . . . both turn on whether the
9
threat of future harm . . . is sufficiently immediate to
constitute a cognizable injury.”); Presbytery of N.J. of
Orthodox Presbyterian Church v. Florio, 40 F.3d 1454, 1462
(3d Cir. 1994) (“It is sometimes argued that standing is
about who can sue while ripeness is about when they can sue,
though it is of course true that if no injury has occurred, the
plaintiff can be told either that she cannot sue, or that she
cannot sue yet.” (internal quotation marks omitted)).
At its core, ripeness works “to determine whether a
party has brought an action prematurely . . . and counsels
abstention until such a time as a dispute is sufficiently
concrete to satisfy the constitutional and prudential
requirements of the doctrine.” Peachalum v. City of York, 333
F.3d 429, 433 (3d Cir. 2003). Various concerns underpin it,
including whether the parties are in a “sufficiently adversarial
posture,” whether the facts of the case are “sufficiently
developed,” and whether a party is “genuinely aggrieved.” Id.
at 433-34. In Abbott Laboratories v. Gardner, 387 U.S. 136
(1967), abrogated on other grounds by Califano v. Sanders,
430 U.S. 99 (1977), the Supreme Court laid out two principal
considerations for gauging ripeness including (1) “the fitness
of the issues for judicial decision” and (2) “the hardship to the
parties of withholding court consideration.” Id. at 149. And in
Susan B. Anthony List v. Driehaus (“SBA List”), 134 S. Ct.
2334 (2014), the Court illustrated that when evaluating
ripeness as a matter of standing in preenforcement challenges,
10
we ask whether the plaintiff has “alleged a sufficiently
imminent injury for the purposes of Article III.” Id. at 2338.3
“In declaratory judgment cases, we apply a somewhat
refined test” for ripeness, Khodara Envtl., Inc. v. Blakely, 376
F.3d 187, 196 (3d Cir. 2004) (internal quotation marks
omitted), that was first articulated in our decision in Step-
Saver Data Systems, Inc. v. Wyse Technology, 912 F.2d 643
(3d Cir. 1990). Under the Step-Saver test, we look to “(1) the
adversity of the parties’ interests, (2) the conclusiveness of
the judgment, and (3) the utility of the judgment.” Khodara,
376 F.3d at 196 (internal quotation marks omitted). But
before applying it, two points warrant clarification.
First, although our Step-Saver test differs in form from
the ripeness test articulated in Abbott Labs, or the standing
test articulated in SBA List, it is merely a different framework
for conducting the same justiciability inquiry. Since Step-
Saver “simply alters the headings under which various factors
are grouped,” Phila. Fed’n of Teachers v. Ridge, 150 F.3d
319, 323 n.4 (3d Cir. 1998), we consider related claims for
declaratory and injunctive relief under the same Step-Saver
test in a case like this one. See, e.g., NE Hub, 239 F.3d at 339-
49. And when we apply Step-Staver, Abbott Labs’s
“hardship” and “fitness” factors still guide our analysis, as
does the standing test set forth in SBA List.
3
In SBA List, the Supreme Court also suggested that
the prudential components of ripeness may no longer be a
valid basis to find a case nonjusticiable. 134 S. Ct. at 2347.
To the extent we discuss prudential ripeness factors, our
holding does not rest on them; rather, our holding rests on the
constitutional requirements of Article III.
11
Second, while the three Step-Saver factors “guide our
disposition,” Step-Saver, 912 F.2d at 647, they “are not
exhaustive of the principles courts have considered in
evaluating ripeness.” Armstrong World Indus., Inc. v. Adams,
961 F.2d 405, 412 (3d Cir. 1992). As we have noted, “where
the constitutionality of a state provision is at issue, the
Supreme Court has taken into account the degree to which
postponing federal judicial review would have the advantage
of permitting state courts further opportunity to construe the
challenged provisions.” Id. (brackets and internal quotation
marks omitted). And courts have also invoked the Ashwander
principle, see Ashwander v. Tenn. Valley Auth., 297 U.S. 288,
346–47, (1936) (Brandeis, J., concurring), to avoid “ruling on
federal constitutional matters in advance of the necessity of
deciding them.” Armstrong, 961 F.2d at 413; see also Renne
v. Geary, 501 U.S. 312, 324 (1991) (“It is not the usual
judicial practice . . . to proceed to an overbreadth issue . . .
before it is determined that the statute would be valid as
applied.” (internal quotation marks omitted)). With these
principles in mind, we will analyze the justiciability of
Plains’s claims.
B
Four of the claims that are the subject of Plains’s
appeal are facial challenges—three allege that the estimation
provisions of the Delaware Escheats Law are preempted, void
for vagueness, and violate substantive due process, while the
fourth alleges that the Delaware Escheats Law violates the
Fourth Amendment by not affording precompliance judicial
review of an auditor’s document demands. The two as-
applied claims at issue on appeal include a Fourth
Amendment challenge to the scope of Kelmar’s document
requests and a procedural due process challenge to Kelmar’s
appointment to conduct the audit. For the reasons set forth
12
below, we agree with the District Court that Plains’s four
facial challenges and its as-applied Fourth Amendment claim
are unripe.4 But we disagree with its conclusion that Plains’s
procedural due process claim is not justiciable. In so holding,
we will consider Plains’s facial and as-applied challenges
separately.
Facial Challenges to the Estimation Statute
1. Adversity of Interest
“Parties’ interests are adverse where harm will result if
the declaratory judgment is not entered.” Travelers Ins. Co. v.
Obusek, 72 F.3d 1148, 1154 (3d Cir. 1995). As we have
explained, when “the plaintiff’s action is based on a
contingency, it is unlikely that the parties’ interests will be
sufficiently adverse to give rise to a case or controversy
within the meaning of Article III.” Armstrong, 961 F.2d at
412-13. But “where threatened action by government is
concerned, we do not require a plaintiff to expose himself to
liability before bringing suit to challenge the basis for the
threat.” MedImmune, 549 U.S. at 128-29. Accordingly, “the
party seeking review need not have suffered a completed
harm to establish adversity”—it suffices that there is a
“substantial threat of real harm and that the threat . . . remain
real and immediate throughout the course of the litigation.”
Florio, 40 F.3d at 1463 (internal quotation marks omitted).
4
In reaching these conclusions, we note that our
decision today does not speak to the decision in Marathon
Petroleum Corp. v. Cook, 208 F. Supp. 3d 576 (D. Del.
2016), which has been appealed and is pending before
another panel of this Court. There, a different district judge
found a preemption and as-applied Fourth Amendment
challenge to the Delaware Escheats Law ripe.
13
Relying principally on Abbott Labs and our decision in
NE Hub, Plains has taken the position that its interests are
adverse to Delaware’s because it is being forced to choose
between complying with a burdensome law and risking
serious penalties. While we agree that a challenge to
government action is typically ripe when a party is faced with
that dilemma, we simply cannot find that Plains confronts
such a situation here.
Since estimation merely requires Plains to sit back and
wait while Delaware calculates its liability, estimation is not a
burdensome process “where the impact of the administrative
action could be said to be felt immediately by those subject to
it in conducting their day-to-day affairs.” Toilet Goods Ass’n,
Inc. v. Gardner, 387 U.S. 158, 164 (1967). And while one
possible result of the estimation process—an arbitrary
penalty—could harm Plains, that harm would only result after
Delaware (1) concluded that Plains’s records were
inadequate, (2) used estimation, (3) found past-due
abandoned property, and (4) erroneously calculated what was
owed to the State. As such, the only alleged harm Plains
could suffer from estimation is based on contingencies and its
substantive due process, void-for-vagueness, and preemption
claims lack both sufficient adversity for ripeness and a
cognizable Article III injury. See, e.g., Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560 (1992) (noting that Article III
standing requires a party to “have suffered an injury” that is
“actual or imminent, not conjectural or hypothetical.”
(internal quotation marks omitted)); Texas v. United States,
523 U.S. 296, 300 (1998) (“A claim is not ripe for
adjudication if it rests upon contingent future events that may
14
not occur as anticipated, or indeed may not occur at all.”
(internal quotation marks omitted)).5
Unlike estimation, the average Kelmar audit can be
quite burdensome, costing over one million dollars and
spanning three to eight years. Pl. Am. Compl. ¶ 52, J.A. 51.
And Plains maintains that those costs along with Delaware’s
warning that it would “consider the level of Plains’s
cooperation when determining whether penalties should be
assessed,” J.A. 325, have supplied adversity for its Fourth
Amendment claims. Though we think the adversity inquiry is
closer for Plains’s challenge to the audit provisions of the
statute than it is for its challenges to the estimation provisions
of the statute, we still find adversity lacking for two reasons.
First, while “the requirement to go through a
burdensome process can constitute hardship for the purposes
of ripeness,” NE Hub, 239 F.3d at 345, our precedent
confirms that in all but those cases where the administrative
process is at issue and imposes burdens that directly affect an
entity’s day-to-day business, the costs of administrative
investigations are usually not sufficient, however substantial,
to justify review in a case that would otherwise be unripe.
Compare Univ. of Med. & Dentistry of N.J. v. Corrigan, 347
F.3d 57, 70 (3d Cir. 2003) (finding challenge to
administrative process unripe where “the audit at issue” had
“no direct effect on the plaintiffs’ primary conduct” (internal
quotation marks omitted)), with NE Hub, 239 F.3d at 342-46
5
Plains responds that the State’s refusal to disavow
that it will engage in unlawful conduct creates a credible
threat of harm. See Plains Br. 31-33. But that is not sufficient
to make these claims justiciable. The “threatened
enforcement” must still be “sufficiently imminent.” SBA List,
134 S. Ct. at 2342.
15
(finding challenge to preempted administrative process ripe
where subjecting plaintiff to it would affect whether and how
plaintiff proceeded with significant construction project); see
also Ohio Forestry Ass’n, Inc. v. Sierra Club, 523 U.S. 726,
735 (1998) (“[T]he Court has not considered . . . litigation
cost saving sufficient by itself to justify review in a case that
would otherwise be unripe.”); Fed. Trade Comm’n v.
Standard Oil Co. of Cal., 449 U.S. 232, 242 (1980) (noting
the “substantial” burden on the company “of responding to . .
. charges” is “different in kind and legal effect.”). Contrary to
Plains’s arguments on appeal, the administrative process
being challenged here does not present the circumstances
required for administrative-process expenses to supply
adversity. Unlike in NE Hub, the process at issue here is an
“audit . . . directed only at past conduct,” so “the only effects
[Plains] will encounter are related to [its] participation in the
investigatory process and actions that might be taken as a
result.” Corrigan, 347 F.3d at 70. Like in Corrigan, Plains
does not argue that Delaware lacks the authority to conduct
its audit; rather, Plains’s preemption claim is directed at the
statute’s estimation provisions. And finally, in this case
Kelmar’s audit has not yet begun so it is wholly speculative
whether the audit will be particularly burdensome and costly
and result in an enforcement action. The extent of the burden
is thus “conjectural or hypothetical.” Lujan, 504 U.S. at 560
(internal quotation marks omitted).
Second, we do not believe Delaware’s request to
comply with the audit presents the Abbott Labs dilemma that
exists when “a regulation requires an immediate and
significant change in the plaintiffs’ conduct of their affairs
with serious penalties attached to non-compliance.” 387 U.S.
at 153. Since this audit is an investigation confined to past
conduct, it does not have the “direct effect” on “day-to-day
16
business,” id. at 152, that existed in Abbott Labs when
regulations imposed new obligations requiring the company
to change labels, destroy stocks, and invest in new supplies.
And we are not persuaded that Whitaker’s letter attaches
serious penalties to Plains’s decision not to comply with the
audit. Even if we found that she threatened a penalty, since
the penalty cannot be imposed without a finding of unclaimed
property liability, Plains is not yet in a place where it must
choose between submitting to the audit or facing penalties—it
still has a third option where it could refuse to submit to the
audit without incurring a penalty.
2. Conclusiveness
The next prong of Step-Saver considers whether the
contest is based on “a real and substantial controversy
admitting of specific relief through a decree of a conclusive
character, as distinguished from an opinion advising what the
law would be upon a hypothetical set of facts.” Florio, 40
F.3d at 1463 (internal quotation marks omitted). In analyzing
this factor, two concerns are paramount. First, we consider
whether “the legal status of the parties” will “be changed or
clarified.” Travelers, 72 F.3d at 1155. Second, we ask
“whether further factual development . . . would facilitate
decision” or “the question presented is predominantly legal.”
NE Hub, 239 F.3d at 344.
On this prong, Plains argues that its facial challenges
to the Escheats Law would result in a conclusive judgment
because it presents predominately legal claims that require no
factual development. We disagree. To prevail on its facial
challenges, Plains must demonstrate that “no set of
circumstances exists under which the [Escheat Law] would be
valid,” United States v. Salerno, 481 U.S. 739, 745 (1987),
and while “predominantly legal questions are generally
17
amenable to a conclusive determination in a preenforcement
context,” Florio, 40 F.3d at 1468 (emphasis added), that does
not mean they always are. As the Supreme Court’s decision in
City of Los Angeles v. Patel, 135 S. Ct. 2443 (2015), affirms,
“when there is substantial ambiguity as to what conduct a
statute authorizes,” it may be “impossible to tell whether and
to what extent it deviates from the requirements of the
[Constitution].” Id. at 2450 (internal quotation marks
omitted). And in such circumstances, evaluating the
constitutional validity of the statute “is pre-eminently the sort
of question which can only be decided in the concrete factual
context of the case.” Id. at 2449 (quoting Sibron v. New York,
392 U.S. 40, 59 (1968)).
As the Defendants note, Plains’s constitutional
challenges to the Escheats Law, like the facial challenges in
Sibron, involve precisely the sort of case where “further
factual development would significantly advance our ability
to deal with the legal issues presented.” Corrigan, 347 F.3d at
68 (internal quotation marks omitted). The Escheats Law
contains no definition of what estimation entails, nor does it
explain whether preenforcement review exists or what it
looks like. Thus the statute is “susceptible to a wide variety of
interpretations,” Sibron, 392 U.S. at 60, and because we
cannot yet state with certainty what conduct is authorized—
let alone that only unconstitutional conduct is allowed—
ruling on Plains’s facial claims now would not result in
conclusive judgment.6
6
Indeed, Plains concedes in its reply brief that until we
know whether the amendments apply to its audit and what the
enforcement proceedings will look like, we lack sufficient
information to determine whether enforcement proceedings
would satisfy the Fourth Amendment. Reply Br. 26. And this
18
3. Practical Utility
Finally, the third prong of the Step-Saver test requires
us to examine the utility of judgment. “Practical utility goes
to whether the parties’ plans of actions are likely to be
affected by a declaratory judgment . . . and considers the
hardship to the parties of withholding judgment.” NE Hub,
239 F.3d at 344-45 (internal quotation marks omitted); see
also Step-Saver, 912 F.2d at 649 (“One of the primary
purposes behind the Declaratory Judgment Act was to enable
plaintiffs to preserve the status quo before . . . damage was
done . . . .”). It also examines whether entry of judgment
“would be useful to the parties and others who could be
affected.” Florio, 40 F.3d at 1470.
While judgment in this case may be of interest to the
other companies challenging this law, practical utility is not
satisfied. Since estimation involves no action by Plains, and
no unclaimed property fine is impending, Plains “would take
the same steps whether or not it was granted a declaratory
judgment.” Pittsburgh Mack Sales & Serv. v. Int’l Union of
same issue plagues Plains’s facial challenges to the estimation
statute. Because in “other contexts and under other statutes,
courts have routinely permitted the use of statistical
sampling” to determine amounts owed to the government,
Chaves Cty. Home Health Serv., Inc. v. Sullivan, 931 F.2d
914, 919 (D.C. Cir. 1991), and because the Escheat Law does
not provide a specific estimation method for us to evaluate,
we would need to see which estimation processes are
employed before we could determine that estimation violates
substantive due process, is impermissibly vague in all its
applications, or is inconsistent with federal common law and
preempted.
19
Operating Eng’rs, 580 F.3d 185, 192 (3d Cir. 2009). And to
the extent a declaratory judgment might spare Plains from a
costly audit, a judgment before Delaware takes any further
action would render the utility of a decision remote for the
same reason a judgment would not be conclusive. Because
the constitutionality of the Escheats Law appears to turn
largely on how it is enforced, any decision now would not
“clarify legal relationships so that plaintiffs (and possibly
defendants) could make responsible decisions about the
future.” NE Hub, 239 F.3d at 345 (internal quotation marks
omitted). Rather, in speculating how the law would be
enforced, we would leave parties to guess whether Delaware
could take the same actions in a different matter.
As-Applied Claims
1. Fourth Amendment Claim
Unlike Plains’s facial claims, Plains’s as-applied
Fourth Amendment claim satisfies the last two prongs of
Step-Saver. A judgment on these claims would be conclusive.
It would affect “the legal status of the parties” by determining
whether Delaware can request the documents they demanded.
Travelers, 72 F.3d at 1155. And further factual development
is unnecessary—because Kelmar has already issued its
document requests, we have “a set of facts from which” we
can “declare the parties’ rights based on those facts.” Id.
Practical utility is satisfied for similar reasons. Holding that
the document requests are overbroad would affect what Plains
turns over, so its “actions are likely to be affected by a
declaratory judgment.” Step-Saver, 912 F.2d at 649 n.9. And
“entry of a declaratory judgment . . . in the instant case would
be useful to the parties and others who could be affected,” by
providing some guidance on what documents may be
requested during an audit. Florio, 40 F.3d at 1469.
20
Nonetheless, the fact that this claim satisfies these two
prongs does not make it ripe—our precedent makes clear that
“plaintiffs raising predominantly legal claims must still meet
the minimum requirements for Article III jurisdiction,”
Armstrong, 961 F.2d at 421, and, for the same reasons
Plains’s facial Fourth Amendment claim lacks adversity, its
as-applied Fourth Amendment claim does so as well. Again,
in all but those cases where the administrative process is at
issue and affects a plaintiff’s primary conduct, the burden of
an administrative investigation cannot usually itself confer
Article III jurisdiction. And this is not an Abbott Labs
situation. Whether put in terms of ripeness or standing,
because the audit is not enforceable, and because its
occurrence is still based on contingencies, Plains has not
alleged a “sufficiently imminent injury” that would give rise
to a justiciable case under Article III of the Constitution. SBA
List, 134 S. Ct. at 2338.
2. Procedural Due Process Claim
Finally, we hold that the District Court improperly
concluded that Plains’s as-applied procedural due process
21
claim is not justiciable.7 To establish a due process violation,
all Plains must show is that it was required to submit a dispute
to a self-interested party. See, e.g., Carey v. Piphus, 435 U.S.
247, 266 (1978) (“Because the right to procedural due process
is ‘absolute’ in the sense that it does not depend upon the
merits of a claimant’s substantive assertions . . . we believe
that the denial of procedural due process should be actionable
. . . without proof of actual injury.”); United Church of Med.
Ctr. v. Med. Ctr. Comm’n, 689 F.2d 693, 701 (7th Cir. 1982)
(“Submission to a fatally biased decisionmaking process is in
itself a constitutional injury”). And because Kelmar has been
vested with responsibility for conducting the Plains audit and
has issued document demands, this claim satisfies all three
Step-Saver prongs.
As with the as-applied Fourth Amendment claim, the
conclusiveness and utility prongs of Step-Saver are satisfied.
No further factual development is needed to address the
merits of this claim, and a ruling on the merits would be
7
On appeal, Cook, Gregor, and Whitaker argue that
this claim was not raised below. We disagree. Plains’s
amended complaint specifically challenges Delaware’s
delegation of authority to Kelmar. Pl. Am. Compl. ¶ 116, J.A.
68 (“Kelmar has a large financial stake in the outcome of the
audit and is not a neutral party.”). And Plains reiterated its
challenge to Kelmar’s appointment in its opposition to the
Defendants’ motions to dismiss. S.A. 22 (“Plains has asserted
claims for violations of procedural and substantive due
process based on . . . Defendants’ improper delegation of
authority to Kelmar, allowing Kelmar to act in a quasi-
judicial capacity . . . .”). Perhaps Plains could have been
clearer. But its challenge to Kelmar’s appointment was
adequately raised below.
22
“useful to the parties and others who could be affected” given
Delaware’s widespread use of private auditors. Florio, 40
F.3d at 1470. In addition, given the nature of a biased
adjudicator claim, adversity exists. Because the conduct being
challenged by Plains is the appointment of Kelmar to conduct
this audit, the harm alleged for this claim is not based on a
contingency; it is based on conduct that has already occurred.
Perhaps this arrangement is constitutional, as Delaware
asserts, but that is a merits question. Whitmore v. Arkansas,
495 U.S. 149, 155 (1990) (“Our threshold inquiry into
standing ‘in no way depends on the merits of the
[petitioner’s] contention that particular conduct is illegal.’”
(quoting Warth v. Seldin, 422 U.S. 490, 500 (1975))). Since
all three Step-Saver elements are present, Plains’s procedural
due process claim is ripe and the District Court erred in
dismissing it. Travelers, 72 F.3d at 1154.
IV
Though Cook, Gregor, and Whitaker request that we
affirm the District Court’s dismissal of Plains’s procedural
due process claim on the ground that Plains has failed to state
a claim under Rule 12(b)(6), we think it improper to do so.
While we “may affirm a district court for any reason
supported by the record,” Brightwell v. Lehman, 637 F.3d
187, 191 (3d Cir. 2011), “[g]enerally, in the absence of
exceptional circumstances, we decline to consider an issue
not passed upon below.” Berda v. CBS Inc., 881 F.2d 20, 28
(3d Cir. 1989) (internal quotation marks omitted); see also
Singelton v. Wulff, 428 U.S. 106, 120 (1976) (“It is the
general rule, of course, that a federal appellate court does not
consider an issue not passed upon below.”). Here, the
Delaware Defendants do not identify—nor can we discern—
any exceptional circumstances. Thus we will remand this
claim for the District Court to address it in the first instance.
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V
For the reasons set forth above, we will reverse the
District Court’s dismissal of Plain’s procedural due process
claim, and remand it for the District Court’s consideration in
the first instance. We will affirm the District Court’s
dismissal in all other respects.
24