Federal Appeals Court Rules Lower Court Lacked Jurisdiction to Enjoin Colorado Notice and Reporting Law; Direct Marketing Association Will Seek Rehearing En Banc

Many of our readers have been following closely the litigation challenging the Colorado law passed in 2010, which required remote sellers to inform consumers of their obligation to self-report sales and use tax and also required direct marketers to turn over to the Colorado Department of Revenue the names of their Colorado customers along with sales transaction information. In 2012, the United States District Court in Denver declared the Colorado law unconstitutional, as a violation of the Commerce Clause. The Colorado Department of Revenue appealed the District Court decision to the Tenth Circuit Court of Appeals.

On Tuesday, August 20, 2013, the Tenth Circuit issued its decision in Direct Marketing Association v. Brohl. The three judge panel hearing the case did not reach, or address in any way, the constitutional issues in the case. Instead, the Court ruled solely on the question of whether the District Court had jurisdiction to hear the case.

Although the jurisdiction of the federal courts was not contested by the parties, the appellate court concluded that the United States District Court in Denver did not have jurisdiction because of the so-called Tax Injunction Act (28 U.S.C. sec. 1341) (“TIA”). This jurisdictional statute prevents federal courts from entering judgments that restrain the collection of state taxes, and the Tenth Circuit ruled that it applied in this case. The Court stated that the challenge to the constitutionality of the Colorado law must be filed in state court rather than federal court. Therefore, the Court of Appeals remanded the case back to the District Court and directed it to dismiss the DMA’s Commerce Clause claims and to dissolve the permanent injunction against the Department of Revenue’s enforcement of the law.

The effect of the Court of Appeals’ ruling that the case should be dismissed does not take immediate effect, despite some media reports that suggest the contrary. Rather, as in any appeal, the ruling of the Court of Appeals is not implemented until it issues a “mandate” to the District Court. The Tenth Circuit Court of Appeals has not yet issued a mandate in the DMA’s case, and will not do so until after certain deadlines have passed.

In addition, the DMA has decided that it will petition for rehearing “en banc” by the full group of active judges serving on the Tenth Circuit Court of Appeals. The filing of the petition for rehearing en banc will further extend the period during which the Court of Appeals will withhold issuance of the mandate to the District Court. If the petition is granted by the Court, the mandate would not issue until after the rehearing of the case by the full court.

For now, therefore, the injunction entered by the District Court remains in place, and remote sellers are not yet required to comply with the requirements of the Colorado notice and reporting law. We will keep readers apprised of developments in the case in connection with the DMA’s petition for rehearing.

Brann & Isaacson partners George Isaacson and Matthew Schaefer represent the DMA in the case.

LEAD INDICATORS FOR TOWNSVILLE'S PROPERTY MARKET

Herron Todd White's Townsville Rent Roll Survey Report for July 2013 paints a picture of rising rental vacancy rates to 3.75%. The reality of a slowing economy is evident in these figures as Townsville is experiencing a short term oversupply of unit and housing accommodation.

Landlords and investors are advised to factor into their budgets more days on market while their properties are being tenanted. It could also impact on the rental prices in the market as investors compete for lower vacancy time by discounting prices and even offering incentives to customers.

 

Rapid Realty Townsville Principal, Aaron McLeod said "we have planned for a slowing economy by offering higher exposure for our Landlords with feature advertising, more diligent presentation of properties and enhanced focus on "real service, rapid results" in our customer service. Responding quickly to enquiries and receiving owner instructions rapidly is the key to securing desirable customers", Rapid Realty's Principal said.

The increased vacancy rates could be impacted by the supply of new houses on the market continuing while a noticeable drop in demand had occurred leading up to the end of financial year. Lower interest rates on borrowings are making home ownership more affordable, causing some renters to be lured into home ownership by the construction sector offering incentive packages in addition to the State Government's construction home owner's grant.

Rapid Realty's Principal said, "our Townsville office is fielding enquiries from buyers for our newly constructed properties for sale with excellent packages for buyers."

Moreover, Rapid Realty expects the demand for accommodation to increase in August based on seasonal inflows of enquiries to their Townsville office.

If you have an investment property and want expert property management and rentals advice, you can contact Rapid Realty at www.rapidrealty.com.au

Nondisclosure Agreement Do’s and Don’ts

The nondisclosure agreement (“NDA”) is perhaps the most common single agreement that a business person is likely to run across. Virtually any preliminary business conversation, either with a potential vendor or a potential customer, is likely to be prefaced with the exchange of an NDA. In general, these documents are fairly standard and innocuous. The typical business person may feel comfortable executing and NDA without consulting counsel. If you are tempted to do so, here are five tips that can help you avoid making a mistake you may later regret.

1. Home Cooking is the Best. Have a standard form of mutual NDA that you can readily offer up. In some instances, this is a pure leverage issue, but if you are dealing with a party that does not have its own form, you can seize the initiative by providing your own.
2. What’s Sauce for the Goose is Sauce for the Gander. Some so-called “standard” NDA’s only protect the information of one party (typically the one providing the form of agreement). It is important to make sure that any NDA that you sign is mutual. Obviously, you want your confidential information to be protected to the same degree as that of the other party. In addition, a mutual NDA tends to be more even-handed than a one-way NDA.
3. Make sure you can live with it. The single most troublesome aspect of many NDA’s is a requirement that any information intended to be subject to the NDA be marked as such upon production, or otherwise specifically designated as confidential. This is fine if you operate in a culture where that practice is common. However, for many of my clients, it simply isn’t. As a result, I often start with a form that includes certain general categories of information being produced as confidential, whether they are marked as such or not.
4. Beware of Overreaching Provisions. Once in a great while, a form of NDA will contain a provision restricting the ability of one party to move forward with a different vendor, or creating an exclusive negotiating window. This is almost never appropriate at the early stages of a business relationship.
5. Choice of Law/Jurisdiction. If possible, it is highly preferable to have an NDA specify that any disputes will be resolved in your home jurisdiction under the laws of your home state. Often, a compromise is possible, designating a state that is home to neither party. It is especially critical, however, to focus on this issue if the other party is from a foreign country. It is rarely acceptable for a US based firm to consent to the application of overseas law and jurisdiction.

If you are able to focus on these five items, and avoid having a document that is unfavorable in any of these respects, you are less likely to end up with an unintended business outcome. With that said, of course, every document and every deal is different. So do not hesitate to consult with counsel. Experienced commercial counsel can help you navigate through a document very quickly, and with little or no loss of deal momentum.