After many months of waiting, the Supreme Court has finally issued its decision in Bilski v. Kappos. The decision addresses the patentability of “business methods.” Read more about the decision and its impact on retailers at our sister blog, Eyes on IP.
UPDATE: Our friends have moved -- you can now visit our sister blog at IP Wise.
Monday, June 28, 2010
Thursday, June 24, 2010
Oklahoma’s New “Colorado-Like” Statute
As we have written in several previous posts, Colorado enacted an onerous reporting requirement for those remote sellers that do not collect and remit the Colorado sales and use tax. The Colorado statute requires such remote sellers to provide three types of notices that they do not collect the Colorado sales and use tax, even though they do not have nexus with Colorado under the Quill standard. Brann & Isaacson, on behalf of the Direct Marketing Association, will be challenging the constitutionality of the statute in a suit to be filed shortly, because the Colorado statute applies to companies that lack nexus.
On June 9, Oklahoma enacted a “Colorado-like” statute, HB 2359, that requires that any retailer that sells tangible personal property to Oklahoma residents must “provide notification on its retail Internet web site or retail catalog and invoices provided to its customers that use tax is imposed and must be paid by the purchaser.” (emphasis added). The statute is Colorado-like in the sense that retailers without nexus are required to provide notice regarding the fact that sales and use tax is due on purchases, but it does not contain the Colorado provisions requiring retailers to provide annual notice (i) to purchasers of the volume of their purchases and that tax should be remitted to the Department of Revenue; and (ii) to the Department of Revenue of their Colorado purchasers and the volume of purchases made during the preceding year. Thus, the Oklahoma statute does not require annual notice to customers of their purchases in the preceding year or an annual report to the Oklahoma Tax Commission, the agency responsible for enforcing the sales tax law, of Oklahoma purchasers from the retailer.
Even the notice that is required under the Oklahoma statute is different than that required under the Colorado statute. The law requires notice on the “Internet web site or retail catalog and invoices provided to consumers.” The use of the word “or” in the statute indicates that a retailer has a choice. It can provide notice on its web site or it may insert notice in its retail catalog and any invoices provided to consumers. It is unclear whether that was the intent of the legislators when adopting the statute. But that is irrelevant, given the statutory interpretation principle that resort to legislative history is permitted only when a statute is ambiguous. There is no ambiguity in the statute. It clearly gives the retailer the choice. The statute did not use the conjunctive phrase “and” between “Internet web site” and “retail catalog and invoices.”
Even if notice is not provided on the web site, a good argument can be made that notice in the catalogs alone is sufficient if the retailer does not provide invoices. We know that many online sellers do not provide invoices. Again, the language of the statute provides for notice in the catalog “and invoices provided to its customers.” So, if a retailer does not provide invoices to customers, under the literal language of the statute the retailer would not be required to provide the notice.
It should also be noted that, although the statute is effective as of July 1, 2010, the notice provisions are not effective until the Oklahoma Tax Commission has adopted a rule implementing the statute. Thus, we will need to review the rule when adopted in order to assess the kind of notice that Oklahoma Tax Commission feels is required.
On June 9, Oklahoma enacted a “Colorado-like” statute, HB 2359, that requires that any retailer that sells tangible personal property to Oklahoma residents must “provide notification on its retail Internet web site or retail catalog and invoices provided to its customers that use tax is imposed and must be paid by the purchaser.” (emphasis added). The statute is Colorado-like in the sense that retailers without nexus are required to provide notice regarding the fact that sales and use tax is due on purchases, but it does not contain the Colorado provisions requiring retailers to provide annual notice (i) to purchasers of the volume of their purchases and that tax should be remitted to the Department of Revenue; and (ii) to the Department of Revenue of their Colorado purchasers and the volume of purchases made during the preceding year. Thus, the Oklahoma statute does not require annual notice to customers of their purchases in the preceding year or an annual report to the Oklahoma Tax Commission, the agency responsible for enforcing the sales tax law, of Oklahoma purchasers from the retailer.
Even the notice that is required under the Oklahoma statute is different than that required under the Colorado statute. The law requires notice on the “Internet web site or retail catalog and invoices provided to consumers.” The use of the word “or” in the statute indicates that a retailer has a choice. It can provide notice on its web site or it may insert notice in its retail catalog and any invoices provided to consumers. It is unclear whether that was the intent of the legislators when adopting the statute. But that is irrelevant, given the statutory interpretation principle that resort to legislative history is permitted only when a statute is ambiguous. There is no ambiguity in the statute. It clearly gives the retailer the choice. The statute did not use the conjunctive phrase “and” between “Internet web site” and “retail catalog and invoices.”
Even if notice is not provided on the web site, a good argument can be made that notice in the catalogs alone is sufficient if the retailer does not provide invoices. We know that many online sellers do not provide invoices. Again, the language of the statute provides for notice in the catalog “and invoices provided to its customers.” So, if a retailer does not provide invoices to customers, under the literal language of the statute the retailer would not be required to provide the notice.
It should also be noted that, although the statute is effective as of July 1, 2010, the notice provisions are not effective until the Oklahoma Tax Commission has adopted a rule implementing the statute. Thus, we will need to review the rule when adopted in order to assess the kind of notice that Oklahoma Tax Commission feels is required.
Monday, June 21, 2010
California Reinserts Reporting Requirements; Tennessee’s Proposal to Expand Nexus Dies in Committee
We’ve been tracking developments in affiliate nexus legislation and attempts to impose Colorado-style reporting requirements on vendors in other states. Since our last updates (here and here), there have been further developments of note:
California
On May 14, we wrote that the California Assembly nixed proposed affiliate nexus legislation and Colorado-style reporting requirements before passing its bill onto the State’s Senate. As in the Assembly’s version, the current iteration of the bill provides that retailers not required to collect use tax provide readily visible notice on their websites and catalogues that use tax is due from the purchaser. Last week, however, the California Senate amended the bill to reinsert reporting requirements.
Under the amended bill, the “[State Board of Equalization] may require the filing of reports” by any person having possession or custody of information relating to sales of tangible personal property (“TPP”) subject to the tax. § 7055(a) (as proposed) (emphasis added). It is unclear to whom, exactly, this possible reporting requirement applies, but the reports “shall be filed when the board requires” and must include names and addresses of purchasers of TPP, the sales price of the TPP, the date of the sale and “such other information as the board may require.”
Additionally, the proposed subsections (b)(1) and (2) indicate mandatory reporting for vendors not registered to collect sales tax whose sales exceed a relatively modest threshold. The subsections require “every person that is not registered with the board” that sells TPP subject to use tax, to file quarterly reports including names, addresses, sales prices, the dates of sales, and “such other information as the board may require.” Subsection (b)(2) provides that the reporting requirement in (b)(1) does not apply to persons whose receipts are less than $100,000 in the prior year and who are reasonably expected to have receipts less than $100,000 in the current year.
It is unclear whether the Senate’s version will survive the legislative process. If the amended bill is passed by the Senate, it must go back before the Assembly for agreement on the amendments. If the Assembly does not agree with the Senate’s amendments, it will be referred to a conference committee formed of members of both houses to resolve any differences.
We will continue tracking the progress of the bill to keep you informed of any new reporting requirements that may be imposed by the State. We also reiterate our previously-stated concerns: that the proposed bill imposes even more onerous reporting obligations than the Colorado statute, and that it may encourage other states to follow suit in attempts to regulate interstate commerce.
Tennessee
We last wrote about Tennessee in April, noting that the State’s affiliate nexus bill had been recommended for passage, but that the State’s Department of Revenue had indicated that it did not believe a mere affiliate relationship would be adequate for a finding of nexus. The legislation has since died in committee, when the General Assembly adjourned on June 10. Only time will tell whether Tennessee intends to make a second run at imposing affiliate nexus rules on out-of-state vendors.
UPDATE, Aug. 31, 2010: Please see our most recent post concerning the status of the California Bill here.
UPDATE, Jul. 5, 2011: California has enacted a new nexus law.
California
On May 14, we wrote that the California Assembly nixed proposed affiliate nexus legislation and Colorado-style reporting requirements before passing its bill onto the State’s Senate. As in the Assembly’s version, the current iteration of the bill provides that retailers not required to collect use tax provide readily visible notice on their websites and catalogues that use tax is due from the purchaser. Last week, however, the California Senate amended the bill to reinsert reporting requirements.
Under the amended bill, the “[State Board of Equalization] may require the filing of reports” by any person having possession or custody of information relating to sales of tangible personal property (“TPP”) subject to the tax. § 7055(a) (as proposed) (emphasis added). It is unclear to whom, exactly, this possible reporting requirement applies, but the reports “shall be filed when the board requires” and must include names and addresses of purchasers of TPP, the sales price of the TPP, the date of the sale and “such other information as the board may require.”
Additionally, the proposed subsections (b)(1) and (2) indicate mandatory reporting for vendors not registered to collect sales tax whose sales exceed a relatively modest threshold. The subsections require “every person that is not registered with the board” that sells TPP subject to use tax, to file quarterly reports including names, addresses, sales prices, the dates of sales, and “such other information as the board may require.” Subsection (b)(2) provides that the reporting requirement in (b)(1) does not apply to persons whose receipts are less than $100,000 in the prior year and who are reasonably expected to have receipts less than $100,000 in the current year.
It is unclear whether the Senate’s version will survive the legislative process. If the amended bill is passed by the Senate, it must go back before the Assembly for agreement on the amendments. If the Assembly does not agree with the Senate’s amendments, it will be referred to a conference committee formed of members of both houses to resolve any differences.
We will continue tracking the progress of the bill to keep you informed of any new reporting requirements that may be imposed by the State. We also reiterate our previously-stated concerns: that the proposed bill imposes even more onerous reporting obligations than the Colorado statute, and that it may encourage other states to follow suit in attempts to regulate interstate commerce.
Tennessee
We last wrote about Tennessee in April, noting that the State’s affiliate nexus bill had been recommended for passage, but that the State’s Department of Revenue had indicated that it did not believe a mere affiliate relationship would be adequate for a finding of nexus. The legislation has since died in committee, when the General Assembly adjourned on June 10. Only time will tell whether Tennessee intends to make a second run at imposing affiliate nexus rules on out-of-state vendors.
UPDATE, Aug. 31, 2010: Please see our most recent post concerning the status of the California Bill here.
UPDATE, Jul. 5, 2011: California has enacted a new nexus law.
Monday, June 14, 2010
The Incredible Shrinking Jurisdiction?
On June 1, 2010, the United States Supreme Court in Levin v. Commerce Energy, Inc., 560 U.S. __ (2010), issued as close as it gets these days to a unanimous decision. Though fractured into four separate opinions, all of the Justices reached the same conclusion: that the United States District Court for the Southern District of Ohio correctly dismissed a state tax-related case. But, the distinction between the majority opinion and a concurrence by the Court’s most conservative Justices reveals that the door to federal court involvement in state tax matters remains open.
For direct marketers, access to federal courts for challenges to the constitutionality of state and local taxes and related enforcement efforts by the states is especially important. Not only are federal courts often more experienced in regards to federal constitutional issues, including Commerce Clause disputes, but they offer at least the appearance of a more neutral playing field since the federal courts are not funded by state tax revenue and are often called upon to play the role of arbiter in jurisdictional battles between the states. Thus, any decision that appears to restrict access to federal courts needs to be reviewed very closely.
Background. Under Ohio law, certain sellers of natural gas enjoy tax exemptions, while others do not. Mindful of the Tax Injunction Act, and its broad limitation on the federal courts entertaining suits seeking to arrest the collection of state tax (or to reduce the amount of tax so collected), the plaintiffs came up with a clever approach that convinced the United States Court of Appeals for the Sixth Circuit to reinstate the case previously dismissed by the District Court. In crafting their complaint, the plaintiffs sought not to reduce their own tax obligations or in any way arrest the collection of taxes. Rather, the relief they sought was to deny their competitors certain tax exemptions, the net result of which, if successful, would be to increase state tax revenues. Because the plaintiffs did not seek to arrest collection of tax, the Sixth Circuit agreed that they had avoided falling under the Tax Injunction Act’s restrictions.
In addition to the Tax Injunction Act, the doctrine of “comity” may also keep tax cases out of federal court. Comity is the doctrine under which a court can stay its hand in hearing a case that lies within its jurisdiction to hear, and to do so out of respect for the power of other courts--perhaps better suited--to resolve the matter. In tax cases like this one, a rationale for dismissal of a case on the basis of comity could include deference to state courts to resolve matters that impact on their governmental revenue-raising prerogatives and powers.
The plaintiffs in Levin argued, and the Sixth Circuit found, relying mainly upon a footnote from Hibbs v. Winn, 542 U.S. 88 (2004), that comity likewise did not bar the suit. In Hibbs, the Supreme Court explained in a footnote that principles of comity only preclude federal court jurisdiction “when plaintiffs have sough district-court aid in order to arrest or countermand state tax collection.” Hibbs, 542 U.S. at 107 n. 9. It made sense. After all, the plaintiffs expressly disclaimed any interest in having their own taxes reduced or inhibiting in any way the collection of taxes by the State of Ohio.
The Supreme Court Reverses. But, the Supreme Court ran away as fast as it could from the footnote in Hibbs. In its majority opinion, the Court held that the plaintiffs were not free to elect a form of relief that would sidestep the Tax Injunction Act or comity. Whether to strike down the exemptions (as the plaintiffs had requested) or to apply the exemptions to all natural gas sellers (including the plaintiffs) was the prerogative of the State of Ohio, the Court explained, and not the federal courts or the plaintiffs. The Court noted that it has, as a matter of practice, abstained from determining remedial choices, allowing states the flexibility to respond as they see fit once provided a finding that a state tax statute is constitutionally infirm. See. e.g., McKesson Corp. v. Fla. Dep’t of Business Regulation, 496 U.S. 18, 49-40 (1990).
The Court also distinguished Hibbs on the grounds that the plaintiffs in the Hibbs case were, effectively, strangers to the underlying tax controversy arising out of tax credits allowed for payments that subsidized parochial school scholarships. “It was essentially,” the majority in Levin observed, “an attack on the allocation of state resources for allegedly unconstitutional purposes” by “outsiders to the tax expenditure.” Thus, “[u]nlike the Hibbs plaintiffs, respondents do object to their own tax situation, measured by the allegedly more favorable treatment accorded [their competitors].” In Hibbs, the majority also noted, the only remedy was the invalidation of the tax credit—and, as a result, the case did not result in the intrusion of the federal courts into state remedial choices. Notably, in a concurring opinion, the more conservative Justices found that both comity and the Tax Injunction Act barred federal court adjudication of the case and supported their decision to reinstate the District Court’s dismissal.
Implications. The conservative members of the Court signaled the likely impact of the Levin case when they bemoaned the Court’s reliance on comity (a “prudential ground”) rather than the Tax Injunction Act (a "jurisdictional ground"). This is an important distinction—because the federal courts have it within their discretion to refrain from hearing a case where principles of comity, alone, are concerned. Such a discretionary decision ordinarily would be given considerable respect on appeal. In contrast, federal courts have no discretion to hear a case that is prohibited by the Tax Injunction Act. The Act reflects an absolute limitation on the courts' power to hear the matter. Justice Thomas pointedly identified the majority's holding as creating a loophole “to leave the door [of the federal courts] open to doing in future cases what it did in Hibbs, namely, retain federal court jurisdiction over constitutional claims that the Court simply does not believe Congress should have entrusted to state judges under the Act, see 542 U.S., at 113-28 (Kennedy, J., dissenting).”
For direct marketers, access to federal courts for challenges to the constitutionality of state and local taxes and related enforcement efforts by the states is especially important. Not only are federal courts often more experienced in regards to federal constitutional issues, including Commerce Clause disputes, but they offer at least the appearance of a more neutral playing field since the federal courts are not funded by state tax revenue and are often called upon to play the role of arbiter in jurisdictional battles between the states. Thus, any decision that appears to restrict access to federal courts needs to be reviewed very closely.
Background. Under Ohio law, certain sellers of natural gas enjoy tax exemptions, while others do not. Mindful of the Tax Injunction Act, and its broad limitation on the federal courts entertaining suits seeking to arrest the collection of state tax (or to reduce the amount of tax so collected), the plaintiffs came up with a clever approach that convinced the United States Court of Appeals for the Sixth Circuit to reinstate the case previously dismissed by the District Court. In crafting their complaint, the plaintiffs sought not to reduce their own tax obligations or in any way arrest the collection of taxes. Rather, the relief they sought was to deny their competitors certain tax exemptions, the net result of which, if successful, would be to increase state tax revenues. Because the plaintiffs did not seek to arrest collection of tax, the Sixth Circuit agreed that they had avoided falling under the Tax Injunction Act’s restrictions.
In addition to the Tax Injunction Act, the doctrine of “comity” may also keep tax cases out of federal court. Comity is the doctrine under which a court can stay its hand in hearing a case that lies within its jurisdiction to hear, and to do so out of respect for the power of other courts--perhaps better suited--to resolve the matter. In tax cases like this one, a rationale for dismissal of a case on the basis of comity could include deference to state courts to resolve matters that impact on their governmental revenue-raising prerogatives and powers.
The plaintiffs in Levin argued, and the Sixth Circuit found, relying mainly upon a footnote from Hibbs v. Winn, 542 U.S. 88 (2004), that comity likewise did not bar the suit. In Hibbs, the Supreme Court explained in a footnote that principles of comity only preclude federal court jurisdiction “when plaintiffs have sough district-court aid in order to arrest or countermand state tax collection.” Hibbs, 542 U.S. at 107 n. 9. It made sense. After all, the plaintiffs expressly disclaimed any interest in having their own taxes reduced or inhibiting in any way the collection of taxes by the State of Ohio.
The Supreme Court Reverses. But, the Supreme Court ran away as fast as it could from the footnote in Hibbs. In its majority opinion, the Court held that the plaintiffs were not free to elect a form of relief that would sidestep the Tax Injunction Act or comity. Whether to strike down the exemptions (as the plaintiffs had requested) or to apply the exemptions to all natural gas sellers (including the plaintiffs) was the prerogative of the State of Ohio, the Court explained, and not the federal courts or the plaintiffs. The Court noted that it has, as a matter of practice, abstained from determining remedial choices, allowing states the flexibility to respond as they see fit once provided a finding that a state tax statute is constitutionally infirm. See. e.g., McKesson Corp. v. Fla. Dep’t of Business Regulation, 496 U.S. 18, 49-40 (1990).
The Court also distinguished Hibbs on the grounds that the plaintiffs in the Hibbs case were, effectively, strangers to the underlying tax controversy arising out of tax credits allowed for payments that subsidized parochial school scholarships. “It was essentially,” the majority in Levin observed, “an attack on the allocation of state resources for allegedly unconstitutional purposes” by “outsiders to the tax expenditure.” Thus, “[u]nlike the Hibbs plaintiffs, respondents do object to their own tax situation, measured by the allegedly more favorable treatment accorded [their competitors].” In Hibbs, the majority also noted, the only remedy was the invalidation of the tax credit—and, as a result, the case did not result in the intrusion of the federal courts into state remedial choices. Notably, in a concurring opinion, the more conservative Justices found that both comity and the Tax Injunction Act barred federal court adjudication of the case and supported their decision to reinstate the District Court’s dismissal.
Implications. The conservative members of the Court signaled the likely impact of the Levin case when they bemoaned the Court’s reliance on comity (a “prudential ground”) rather than the Tax Injunction Act (a "jurisdictional ground"). This is an important distinction—because the federal courts have it within their discretion to refrain from hearing a case where principles of comity, alone, are concerned. Such a discretionary decision ordinarily would be given considerable respect on appeal. In contrast, federal courts have no discretion to hear a case that is prohibited by the Tax Injunction Act. The Act reflects an absolute limitation on the courts' power to hear the matter. Justice Thomas pointedly identified the majority's holding as creating a loophole “to leave the door [of the federal courts] open to doing in future cases what it did in Hibbs, namely, retain federal court jurisdiction over constitutional claims that the Court simply does not believe Congress should have entrusted to state judges under the Act, see 542 U.S., at 113-28 (Kennedy, J., dissenting).”
Wednesday, June 9, 2010
Maine Voters Repeal Tax Legislation
Although some votes remain to be counted, it now seems clear that Maine voters have repealed tax legislation in a statewide referendum held yesterday. In a quirk of Maine law, under the State’s Constitution, voters are able to act as a fourth branch of the State’s government by introducing “people’s veto referenda” to repeal previously enacted legislation.
Last Spring, the State enacted tax reform legislation that lowered income tax rates and expanded the sales and use tax to new goods and services, while increasing the meals and lodging tax. The effective date of the legislation was stayed pending yesterday’s vote on the referendum. With over 70% of precincts now reporting in, the referendum seeking repeal of the new law is projected to win approval, and thus it appears none of the provisions of the new law will become effective. Tax professionals can hold off updating their Maine tax research for now…
Last Spring, the State enacted tax reform legislation that lowered income tax rates and expanded the sales and use tax to new goods and services, while increasing the meals and lodging tax. The effective date of the legislation was stayed pending yesterday’s vote on the referendum. With over 70% of precincts now reporting in, the referendum seeking repeal of the new law is projected to win approval, and thus it appears none of the provisions of the new law will become effective. Tax professionals can hold off updating their Maine tax research for now…
Sunday, June 6, 2010
Albert H. Kritzer, 1928-2010
My recent posts about the status of the CISG and CUECIC and the possible CISG implications of the McDonald's glassware recall sent me, as is almost always the case when I want to refresh my recollection of CISG text or catch up on recent cases and commentary, to the Pace Law School Institute of International Commercial Law's expansive, free, and always helpful online CISG Database.Revisiting the site yesterday, I read the sad news that Albert H. Kritzer, the Institute's founder and godfather of the CISG Database, passed away June 1, while in Egypt to receive the 2010 Arab Conference for Commercial and Maritime Law Career Achievement Award. Pace Law School's notice, including comments from Dean Michelle Simon, is available here.
I met Al Kritzer only once, and briefly, in person, during a break in a conference at Pace Law School that his colleague Jim Fishman hosted commemorating Wood v. Lucy, Lady Duff-Gordon. However, Al and I corresponded (mostly by e-mail) and he was kind enough to introduce me (again, via e-mail) to Joseph Lookofsky (another CISG luminary) and to introduce much of the domestic and international CISG community (via the CISG Database) to my work analyzing the then-entire corpus of published U.S. CISG case law in the chapter on the CISG that I comprehensively revised and greatly expanded a few years ago for Howard O. Hunter's Modern Law of Contracts. Al subsequently invited me to contribute substantive case commentaries to the CISG Database, in which I have been largely remiss for a variety of reasons. I hope that his successor will allow me to honor Al's invitation -- and his life's work.
Saturday, June 5, 2010
Would you like some cadmium with your soft drink?
Yesterday, the Consumer Product Safety Commission (CPSC), in conjunction with fast-food giant McDonald’s®, voluntarily recalled about 12 million Shrek Forever After™ collectible drinking glasses sold or awaiting sale at McDonald’s® locations throughout the U.S. after someone in Representative Jackie Speier's (D-CA) office alerted the CPSC that the movie-character illustrations on the glasses contained cadmium, prolonged exposure to which may pose a serious long-term health risk.Millville, NJ-based Durand Glass Manufacturing Co. (DGMC), a subsidiary of Arques, France-based Arc International, manufactured the movie-themed glasses, which another Arc International subsidiary, Millville-based Arc International North America, distributed exclusively to McDonald's. McDonald's locations nationwide sold the glasses in May and early June 2010.
McDonald's web site addresses the recall through a series of FAQs (and answers). (For the benefit of those with short attention spans, every answer to which the statement would be germane includes the statement "the CPSC has said the glassware is not toxic.") Arc International deployed a press release. Representative Speier posted a statement on her web site, which also includes a link to a Los Angeles Times article about the recall. Only DreamWorks™ appears to be mum on the subject -- so far, at least. (Perhaps the Shrek-iverse's creators didn't retain all of the product licensing-rights like George Lucas did, not so long ago and not so far away, with the original Star Wars™ trilogy or they made McDonald's pay a non-refundable lump sum to market the glassware.) Rumors of a replacement glass featuring an image of McDonald's CEO Jim Skinner that transmogrifies into a Shrek-alike when filled with any non-Coca-Cola® brand soft or sport drink appear to be completely unfounded.All fun aside, why is a commercial law blog interested in allegedly cadmium-contaminated glassware products introduced into the stream of commerce without any warning about or disclaimer regarding the possibility that they might contain an alleged carcinogen?
If this were a tort law or products liability blog, we might opine about the inevitable class-action product liability lawsuit against some combination of McDonald's, Arc International, Arc International North America, Durand Glass Manufacturing Co., the as-yet undisclosed supplier(s) of the cadmium-contaminated paint or other ingredient Durand used to commemorate Shrek™, Fiona™, Donkey™, and Puss in Boots™ (okay, Puss is probably not trademarked, given that the character's name dates from the late Seventeenth century, but we want to minimize our exposure to IP liability because most of us teach at public universities and neither we nor our employers can afford, in the current fiscal climate, to defend any infringement claim that survives a Rule 12(b)(6) motion) on the glassware (and, perhaps, DreamWorks -- for making a movie about which McDonald's predicted sufficient interest that it undertook to procure the offending glassware for resale).
If this were a civil procedure blog we might weigh whether the terms and conditions (no doubt, conveniently located somewhere on the Internet) purportedly governing McDonald's sale of the collectible glassware unconscionably compel non-class arbitration (assuming facts not in evidence) in light of the Supreme Court's recent grant of certiorari in AT&T Mobility LLC v. Concepcion, No. 09-893 (cert. granted May 24, 2010), about which my friend and UNLV colleague Jean Sternlight and my friend and ContractsProf Blog colleague Meredith Miller have recently blogged here and here, respectively.
If this were a consumer law blog, we might wring our hands or cluck our tongues at yet another clear example of Corporate America's crass exploitation of our children and squeeze-the-last-penny sellers who outsource production of low-priced, lower-cost consumer goods to Third World outposts like ... New Jersey. (Just kidding, Jay.)
But, again, what's the commercial law angle on collectible glassware manufactured for and sold to McDonald's for resale to McDonald's retail customers?
It should go without saying that the most interesting legal issues arising out of this scenario involve (1) what express and implied UCC Article 2 warranties each seller in the chain from DGMC (or DGMC's ingredient supplier) to McDonald's made to anyone who purchased or used the glassware; (2) to what extent, if any, each seller in that chain may have disclaimed some or all of its warranty liability, limited the remedies available to the buyer, user, or other person affected by the glassware's use, or both; (3) whether one or more warranty-making sellers breached one or more warranties to one or more buyer, user, or other person affected by the glassware's use; and (4) what remedies Article 2 affords any person to whom any seller is liable for breach of warranty.
For those wanting to add some international spice to the mix, the CBC reports here that the recall has spread to include all Canadian McDonald's restaurants. Information from the Associated Press and Reuters, reported here, indicates that recalling the glassware sent to Canadian McDonald's restaurants raises the total number of recalled glasses to 13.4 million. Both the U.S. and Canada are parties to the U.N. Convention on Contracts for the International Sale of Goods (CISG). To the extent that the Canadian McDonald's restaurants purchased their Shrek Forever After™ collectible glassware from New Jersey-based DGMC or New Jersey-based Arc International North America, that transaction constituted a sale of specially-manufactured goods (CISG art. 3(1)), purchased for resale, rather than personal, family, or household use (CISG art. 2(a)), by a buyer located in one CISG "contracting state" from a seller located in a different "contracting state" (CISG art. 1(1)(a)). Therefore, unless the Canadian McDonald's buyers and New Jersey-based DGMC or New Jersey-based Arc International North America effectively opted out of the CISG (CISG art. 6), any breach of warranty claim the Canadian buyers might have (CISG art. 35), the extent to which any U.S. seller disclaimed any warranty or limited its liability for breaching any warranty (CISG arts. 6 & 35), and the available remedies (CISG arts. 45-52 & 74-78), will be matters for the CISG to resolve.
Thursday, June 3, 2010
Meanwhile, on the UNCITRAL Front
Having recently updated you on the status of the various official UCC revisions and amendments (nothing new to report on that front, by the way), I thought it would be worthwhile to take UNCITRAL's pulse and see how the U.N. Conventions on Contracts for the International Sale of Goods (CISG) and on the Use of Electronic Communications in International Contracting (CUECIC) are faring.
Both strike me as profoundly relevant to anyone teaching Contracts, Sales (or a UCC survey course that includes sales), International Sales (or an International Commercial Transactions survey course), or -- at least in the CUECIC's case -- an Electronic Commerce course. The CUECIC's fortunes might also shed some light on the likelihood that the ALI Principles of the Law of Software Contracts will influence contracting practices, contracting disputes, and the evolution of contract law outside the U.S.
CISG
The U.N. first approved the CISG 30 years ago, and it had gathered the requisite ten ratifications and accessions to take effect ("enter into force" to use the U.N.'s terminology) on January 1, 1988. As of June 1, 2010, when Albania's accession entered into force, the CISG was in effect in 74 countries, including Australia, Canada, China, France, Germany, Italy, Japan, Mexico, the Russian Federation and ten of the other fourteen former Soviet republics, Singapore, and South Korea. Great Britain and most of OPEC's member-states are notable non-signatories.
CUECIC
The U.N. General Assembly adopted the CUECIC in November 2005. Despite the International Chamber of Commerce's endorsement, only 18 countries have signed the convention, and none has acceded to, accepted, approved, ratified, or succeeded to it. Consequently, it is not yet in effect anywhere. Moreover, nearly 2-1/2 years have passed since Honduras became the most recent signatory in January 2008. The United States and most of its major trading partners -- excluding China, the Russian Federation, Singapore, and South Korea -- have not signed the CUECIC.
Both strike me as profoundly relevant to anyone teaching Contracts, Sales (or a UCC survey course that includes sales), International Sales (or an International Commercial Transactions survey course), or -- at least in the CUECIC's case -- an Electronic Commerce course. The CUECIC's fortunes might also shed some light on the likelihood that the ALI Principles of the Law of Software Contracts will influence contracting practices, contracting disputes, and the evolution of contract law outside the U.S.
CISG
The U.N. first approved the CISG 30 years ago, and it had gathered the requisite ten ratifications and accessions to take effect ("enter into force" to use the U.N.'s terminology) on January 1, 1988. As of June 1, 2010, when Albania's accession entered into force, the CISG was in effect in 74 countries, including Australia, Canada, China, France, Germany, Italy, Japan, Mexico, the Russian Federation and ten of the other fourteen former Soviet republics, Singapore, and South Korea. Great Britain and most of OPEC's member-states are notable non-signatories.
CUECIC
The U.N. General Assembly adopted the CUECIC in November 2005. Despite the International Chamber of Commerce's endorsement, only 18 countries have signed the convention, and none has acceded to, accepted, approved, ratified, or succeeded to it. Consequently, it is not yet in effect anywhere. Moreover, nearly 2-1/2 years have passed since Honduras became the most recent signatory in January 2008. The United States and most of its major trading partners -- excluding China, the Russian Federation, Singapore, and South Korea -- have not signed the CUECIC.
Tuesday, June 1, 2010
FED Introduces Credit Card Agreement Tool
After a relative lull in payment card regulation news over the past few months, cards are back front and center. The big news, of course, is that the financial reform bill passed by the Senate would limit debit card interchange rates and provide merchants more flexibility in steering customers toward various means of payment. More on that as the final legislation takes shape. Today, I wanted to highlight the FED's credit card agreement tool. A little publicized provision of the Credit Card Holders Bill of Rights required the FED to establish a website providing ready access to the credit card agreements of major issuers. In theory, such a tool would permit inexpensive comparison shopping. In reality, the website is of limited utility to consumers. The agreements are long and complex, making comparison shopping difficult for everyone and probably impossible for non-lawyers. In addition, very small card issuers are not included.
Still, the tool may be of use to consumer groups who could review the offerings and make recommendations to consumers in language that would be easier to understand.
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