Appellate Court Rules in Favor of TDR Client in False Claims Act Suit Directed to Internet Taxation
October 17, 2016
On October 17, 2016, the Illinois Appellate Court issued an opinion that exonerated TDR’s client of all liability in connection with allegations that TDR’s client violated the Illinois False Claims Act by not collecting sales tax on Internet and mail-order catalog sales. The lawsuit was one of hundreds filed by an Illinois law firm against out-of-state retailers who did not collect sales tax on Internet and catalog sales. At trial, the Circuit Court of Cook County found that TDR’s client conducted a reasonable investigation of the relevant law in connection with its tax obligations and was not liable under the False Claims Act for approximately 95% of the contested sales, but the Circuit Court found liability for 5% of the contested sales. TDR appealed the finding of liability on the remaining 5%. The Illinois Appellate Court affirmed the trial court’s finding that TDR’s client conducted a reasonable investigation, and it reversed the finding of liability for the remaining 5% of the sales, leaving TDR’s client with no liability whatsoever.
The Appellate Court’s opinion establishes an important precedent for False Claims Act litigation nationwide, and it will make it easier for courts to identify and put an end to future lawsuits that do not meet the basic requirements of the False Claims Act as early as possible. TDR partners Caesar Tabet and Daniel Konieczny tried the case and argued the appeal.