The Delaware Supreme Court docket gave Overstock.com a win in a False Claims Act (FCA) go well with alleging the retailer did not remit unclaimed reward card funds to the state. Overstock.com Inc. v. the State of Delaware and French, DE Sup. Ct., No. 327,2019 (June 25, 2020). A jury beforehand discovered Overstock liable for roughly $7.three million. The Delaware Supreme Court docket, decoding the FCA statute in impact for the years at concern, decided the trial courtroom decide improperly instructed the jury that the realizing failure to file unclaimed property studies was the making of a false assertion as required to succeed on an FCA declare. Opposite to the trial decide’s directions, the Supreme Court docket decided that to fulfill the FCA commonplace in impact for the years at concern, some doc incorporating the alleged false declare will need to have been supplied to the federal government. Failure to file a report was by definition not a false report or assertion as a result of there was not report or assertion.
Primarily based on this interpretation of the FCA statute, the jury verdict was reversed as a result of Overstock didn’t file any unclaimed property studies with Delaware. Absent a filed report, there was no false declare. The plaintiffs alleged different paperwork had been ample to fulfill the submission of a “false report or assertion” component of the related FCA: (a) Overstock’s books and information and (b) statements to the SEC. The Supreme Court docket rejected these arguments. Overstock’s books and information weren’t ample as a result of these paperwork weren’t submitted to the State and the SEC filings weren’t submitted so as to keep away from the alleged unclaimed property legal responsibility.
Delaware, like many states, adopts the identical language because the federal FCA statute. The federal authorities made amendments in 2009 to incorporate language imposing legal responsibility if somebody “knowingly conceals or knowingly and improperly avoids or decreases an obligation.” Delaware amended its FCA statute in 2013 to incorporate this language.
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This win doesn’t present any steerage on the substantive concern asserted by the plaintiffs at trial concerning whether or not and beneath what details contracting with one other entity to concern reward playing cards imposes unclaimed property obligations on the issuer moderately than the retailer. It is a slim victory because it applies to a previous model of Delaware’s FCA statute. Nonetheless, firms confronted by FCA fits – for each unclaimed property and tax legal responsibility, ought to take a look at when or if the state at concern amended the FCA to undertake the trendy model and whether or not they have a submitting historical past. It’s attention-grabbing that an organization that didn’t file any report is probably higher off beneath the historic FCA language than one who did. Whereas this a victory based mostly on a slim concern, a victory is a victory.
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