Knowledge Center

Thursday, April 23, 2015

HMB's Jordan Goodman Quoted in Bloomberg BNA Tax Report

Retailers Review Narrow Whistle-Blower Precedent From Illinois Appeals Court

by Michael Bologna

2015 WSTR Issue No. 17

Jordan M. Goodman, partner with Horwood Marcus & Berk in Chicago, told Bloomberg BNA April 17 that Internet-based retailers should take note of a March 31 Illinois Appellate Court ruling in a case targeting the cable television and online shopping giant QVC Inc. under the Illinois False Claims Act.

At the same time, Goodman said the ruling would have limited precedential value for retailers being targeted by the Chicago law firm Schad Diamond & Shedden P.C., which serves as qui tam relator in the cases.

Schad Diamond has filed approximately 400 lawsuits under the FCA in Cook County Circuit Court since 2003. Many of the lawsuits, including the action against QVC, allege the defendants knowingly failed to collect and remit use tax on the shipping and handling charges layered on Internet sales of merchandise sold into Illinois.

"The facts are pretty unique, so I don't think it's precedential. But the good thing is, it was a loss for the relator," Goodman said in an interview.

Goodman said the QVC case is unique because it is one of only a handful involving intervention by the Office of the Illinois Attorney General. The attorney general moved for dismissal after the Illinois Department of Revenue expressed no objection to QVC's conduct. The circuit court judge agreed after the relator failed to show "blaring evidence" that the state had acted in bad faith.

Goodman, a member of a Multistate Tax Commission working group drafting model legislation to address flaws in state whistle-blower laws, said the ruling is interesting because so few of the Schad Diamond cases have triggered written opinions.

Moreover, he said retailers will be interested in the fact that an Illinois court has established that a relator can't win damages under the FCA based on taxes paid by a defendant following a voluntary change in conduct triggered by litigation.

At the same time, Goodman said the circumstances described in the QVC case will be rare.

"I wish it was a broader decision, but I don't see it as such," he said.

To contact the reporter on this story: Michael Bologna in Chicago at mbologna@bna.com

To contact the editor responsible for this story: Brett Ferguson at bferguson@bna.com

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