Long v. Dell, Inc.

• Decision Date: 14 December 2009
• Docket Number: No. 2007-346-M.P.,No. 2008-35-Appeal.,2008-35-Appeal.,2007-346-M.P.
• Citation: 984 A.2d 1074
• Parties: Nicholas T. LONG and Julianne Ricci, individually and on behalf of a class of persons similarly situated v. DELL, INC., et al.
• Court: Rhode Island Supreme Court

984 A.2d 1074

Nicholas T. LONG and Julianne Ricci, individually and on behalf of a class of persons similarly situated v. DELL, INC., et al.

No. 2008-35-Appeal.

No. 2007-346-M.P.

Supreme Court of Rhode Island.

December 14, 2009.

Christopher Whitney, Esq., Providence, Edward Rapacki, Pro Hac Vice, Boston, MA, for Plaintiffs.

Stephen MacGilivray, Esq., Darlene Alt, Esq., Heather Pierce, Esq., Providence, John Shope, Pro Hac Vice, Boston, MA, Bernard Lemos, Pro Hac Vice, Providence, for Defendants.

Present: GOLDBERG and FLAHERTY, JJ., and WILLIAMS, C.J. (ret.).

OPINION

GOLDBERG, Justice.

This case came before the Supreme Court on October 6, 2009. The defendants, Dell, Inc. f/k/a Dell Computer Corp., Dell Catalog Sales L.P., Dell Marketing L.P., Qualxserv, LLC, and Banctec, Inc. (Dell or collectively defendants) and the intervenor, David M. Sullivan, tax administrator for the State of Rhode Island, sought common-law certiorari to review the denial of a motion to dismiss this case for lack of subject-matter jurisdiction. The plaintiffs, Nicholas T. Long and Julianne Ricci (plaintiffs), individually and on behalf of a yet-to-be-certified class of persons similarly situated filed a class-action lawsuit in Superior Court alleging violations of the Rhode Island Deceptive Trade Practices Act (DTPA) under G.L. 1956 chapter 13.1 of title 6, as well as common-law negligence. For the following reasons, we affirm the order of the Superior Court, quash the writ, and remand the case to the lower court for trial.

Facts and Travel

This case arrives before us as a putative class action involving Dell computers and the optional service contracts Dell offers for its products.¹ The central issue before us is whether the Superior Court has subject-matter jurisdiction to entertain the complaint. Before reaching that question, however, we must address the complex travel that brings us to this point.

The original plaintiff in this action was Mary E. DeFontes, individually and on behalf of a class of similarly situated persons. She brought suit on May 16, 2003, alleging defendants collected an improper tax on the service contracts. Subsequently, Nicholas T. Long joined the suit as a plaintiff on July 16, 2003; he included a new allegation that defendants collected an improper tax on the shipping and handling (transportation) charges, in addition to the service contracts. It is important to note that Mr. Long purchased his Dell computer for business purposes.² Also, it was discovered that Mary E. DeFontes was an employee of plaintiffs' counsel and, we are informed, plaintiffs filed a "Substituted First Amended Class Action Complaint" that replaced DeFontes with Julianne Ricci as named plaintiff, which the Superior Court granted. Ms. Ricci, unlike Mr. Long, purchased her Dell computer solely for personal use.

There are numerous defendants. Dell is a national computer hardware and software corporation, located in Texas. Within the corporation, there exists Dell Catalog and Dell Marketing, both of which are responsible for selling products to individuals and businesses. Whenever Dell sells a product, it offers consumers optional service repair contracts to address any defects in its products. Dell then acts as an agent for third-party service providers to handle these repairs, among which are defendants, BancTec and QualxServ. Those consumers who elected to purchase the optional service contract were charged a tax on their purchase price, which then was paid to the State of Rhode Island or collected by one of the third-party service providers and subsequently remitted to the State of Rhode Island by that entity. The collection of these taxes is the central dispute in this case.

The plaintiffs purchased their Dell computers, as well as the optional service contracts, in October and December 2000. Also included in the purchase were charges designated as "ship. &/or handling." The plaintiffs allege that the tax levied on the service contracts and the shipping and handling fees was illegal and should not have been collected, they argue, because taxes are payable only on sales of personal property. Because the service contracts and shipping and handling charges are not personalty, plaintiffs contend that they were improperly charged, and they brought claims for negligence and violation of the DTPA. The plaintiffs agree with Dell's contention that the erroneous tax is approximately $50 for Mr. Long and Ms. Ricci combined. However, they are seeking additional statutory damages of $200 per person under the DTPA.³ At the time of this appeal, the action had not yet been certified as a class action.

The defendants, on the other hand, argue that because the cost of the service contract and shipping and handling charges was not stated separately from the price of the hardware (the computer), then the tax must be computed on the entire transaction amount, as opposed to piecemeal taxation on only the hardware. This is the so-called "separately stated" concept of taxation, which was embodied in a former regulation of the Division of Taxation that was in effect at the time of the purchases in 2000.⁴ The defendants further contend that, in accordance with G.L. 1956 § 44-18-12(b)(5) (which has been amended), "shipping and handling" charges were taxable even if separately stated.⁵

Subsequently, in 2005 and 2006, defendants obtained letter rulings⁶ from the tax administrator on the taxation issues that were raised in this case. The tax administrator's letter rulings declared that consumer transactions, such as Ricci's purchase for personal use, should not have included tax on the service contract because the invoice separately stated the service-contract price. However, the letter rulings also declared that the taxes collected on commercial-use transactions, such as Mr. Long's purchase, were proper because neither the service-contract price nor the "transportation" charges were stated separately. In short, the letter rulings found that the tax was properly collected on the entire amount for Long's purchase and was correct concerning the shipping and handling charge for Ricci's purchase. It should be noted that plaintiffs dispute the correctness of portions of these letter rulings and contest the validity of the regulation that originally gave way to the "separately-stated" rule. Neither issue, however, is before us.

In March 2007, defendants moved for summary judgment, arguing that Dell did not violate the DTPA as a matter of law, that the collection of sales tax was exempted from the act, that the collection of sales tax was neither deceptive nor unfair and finally, that defendants had no duty cognizable in tort.⁷ The plaintiffs, however, argued that the motion for summary judgment could not be heard until the tax administrator was given notice of the proceedings in accordance with G.L. 1956 § 44-1-13, which provides:

"Whenever in any proceeding in court, by appeal or otherwise, the constitutionality or construction of any tax statute or the validity of the assessment of any tax is in question, the court before which the proceeding is pending shall not proceed with the hearing until notice, as the court may direct, has been given to the tax administrator of the pending of the proceeding, so that the tax administrator may appear and be heard with reference to the proceeding."

The tax administrator subsequently moved to intervene in the case, he filed a motion to dismiss, alleging that the Superior Court lacked subject-matter jurisdiction to hear this case. On October 19, 2007 the hearing justice denied the tax administrator's motion as to Ms. Ricci's claims. On October 30, 2007, the hearing justice granted a stay of proceedings to allow defendants to seek review in this Court by way of certiorari. The hearing justice determined that based on this Court's decision in Park v. Ford Motor Co., 844 A.2d 687, 694 (R.I.2004), in which we held that the Superior Court has jurisdiction over claims that are joined to a DTPA claim, there was ancillary jurisdiction over Ms. Ricci's negligence claim because the Court was vested with jurisdiction over the DTPA claim. The hearing justice also relied on our decision in Park v. Ford Motor Co., 928 A.2d 469, 473 (R.I.2007), where we held that the Superior Court may exercise ancillary jurisdiction over other claims that a plaintiff may have, even if those claims would not meet the amount-in-controversy requirement, when those claims are joined with a DTPA claim.

Additionally, the hearing justice dismissed Mr. Long's claim for lack of subject-matter jurisdiction because his use of the Dell computer was for business and as such, the DTPA was not available as a remedy. Consequently, the hearing justice found that the Superior Court did not have subject-matter jurisdiction over Mr. Long's negligence claim because it could not possibly rise to the statutory threshold of $5,000. See G.L. 1956 § 8-2-14(a) (the Superior Court has jurisdiction over all actions at law in which the amount in controversy exceeds $10,000 and has concurrent jurisdiction with the District Court in those actions at law in which the amount in controversy exceeds $5,000 but is less than $10,000). The plaintiffs conceded that Mr. Long could not bring a DTPA claim because his purchase was made for a business purpose. Accordingly, the Superior Court dismissed Mr. Long's claims to the extent he sought damages arising from Dell's alleged negligence.⁸

This Court granted petitions for writ of certiorari, filed by defendants and the tax administrator in order to review the paramount question of subject-matter jurisdiction.

Standard of Review

As we consistently have articulated, "a claim of lack of subject matter jurisdiction may be raised at any time." Pollard v. Acer Group, 870 A.2d 429, 433 (R.I.2005) (citing LaPetite Auberge, Inc. v. Rhode Island Commission for Human Rights, 419 A.2d 274, 280 (R.I.1980) and Rule 12(b)(1) of the Superior Court ...