Long v. Dell, Inc.

• Decision Date: 27 June 2014
• Docket Number: Nos. 2012–248–Appeal, 2012–249–Appeal.,s. 2012–248–Appeal, 2012–249–Appeal.
• Citation: 93 A.3d 988
• Court: Rhode Island Supreme Court
• Parties: Nicholas T. LONG et al. v. DELL, INC., et al.

93 A.3d 988

Nicholas T. LONG et al.

v.DELL, INC., et al.

Nos. 2012–248–Appeal, 2012–249–Appeal.

Supreme Court of Rhode Island.

June 27, 2014.

Joseph Makalusky, Pro Hac Vice, Edward Rapacki, Pro Hac Vice, for Plaintiffs.

John Shope, Pro Hac Vice, Bernard J. Lemos, Esq., Intervenor, for Defendants.

Present: SUTTELL, C.J., GOLDBERG, FLAHERTY, ROBINSON, and INDEGLIA, JJ.

OPINION

Justice GOLDBERG, for the Court.

In this putative class action, the plaintiffs allege that Dell ¹ violated the Deceptive Trade Practices Act (DTPA), G.L. 1956 chapter 13.1 of title 6, and that Dell was negligent by improperly collecting sales taxes on certain services purchased in conjunction with the sales of its computer products. A justice of the Superior Court granted summary judgment in favor of Dell on both counts. This case has been pending for more than ten years and thus far has resulted in two opinions of this Court. It is not over. For the reasons set forth below, we affirm the grant of summary judgment on the negligence count and on the request for injunctive relief by the plaintiff, Nicholas T. Long. However, the grant of summary judgment on the DTPA count by the plaintiff Julianne Ricci is vacated. Additionally, we affirm the Superior Court justice's grant of the plaintiffs' motion to strike the tax administrator's affirmative defenses.²

Facts and Travel

This Court discussed the facts of this case in detail in two previous opinions. See Long v. Dell Inc., 984 A.2d 1074, 1075–78 (R.I.2009); DeFontes v. Dell Inc., 984 A.2d 1061, 1062–65 (R.I.2009). Therefore, we will only recount recent events and those facts that are necessary for context.

The named plaintiffs, Nicholas Long (Long) and Julianne Ricci (Ricci) (collectively and on behalf of the putative class, plaintiffs), purchased Dell computers in late 2000. Along with their computers, they also selected an optional service contract, which essentially amounted to an extended warranty on the computers.³ As the receipt for payment, Ricci received a three-page “acknowledgment” with her order. The first item listed on the acknowledgement is a “Dimension 4100 Series, Pentium Processor at 866 MHz”—presumably the main computer component. The “Unit Price” and “Amount” set forth for this item were both “1,576.00.” The next thirty lines in the acknowledgement contained different item numbers and product descriptions, all of which set forth the “Unit Price” and “Amount” as “0.00.” Finally, a printer cable was listed with a “Unit Price” and “Amount” of “24.95.” A box on the front page of the acknowledgement summarized the charges. The computer, the printer cable, and a shipping and handling charge of $105 brought the subtotal to $1,705.95. The box also set forth that $233 of that amount was taxable, and thus a tax of $16.31 was added. The total paid by Ricci to Dell was $1,722.26. Ricci purchased her computer for personal use.

Long received a similar “acknowledgment” with his order. Only the first line contained a “Unit Price” and “Amount”—both were “2,804.00.” The summary box added a shipping and handling charge of $35 for a subtotal of $2,839. The box denoted that the entire $2,839 subtotal was taxable and charged $198.73 in tax. Thus, Long ultimately paid a total of $3,037.73 to Dell. Unlike Ricci, Long purchased his Dell computer for business purposes.

This class action lawsuit commenced in May 2003.⁴ The crux of the complaint is that Dell charged both Ricci and Long sales tax on nontaxable services.⁵ The two-count complaint alleged that defendants violated the DTPA and were liable for negligence. In their prayer for relief, plaintiffs requested damages, as well as declaratory and injunctive relief. The defendants moved to stay the proceedings and compel arbitration, arguing that by accepting delivery of the goods, plaintiffs agreed to the terms and conditions agreement, which contained an arbitration provision. The Superior Court justice denied that motion and entered an order of final judgment on March 29, 2004. The defendants appealed from that judgment.

In March 2005, Dell requested a determination from the Rhode Island Division of Taxation regarding the application of the sales and use tax. The Division of Taxation responded with a letter ruling.⁶ The letter ruling, which was written by the Chief Revenue Agent, began its discussion by referencing Regulation SU 00–126, entitled “Optional Service, Maintenance, and Extended Warranty Contracts,” which stated, inter alia, that “[t]he charge for the optional service, maintenance, or extended warranty contract is not subject to tax when such a charge is separately stated by the retailer to the purchaser.” The letter stated that “[t]he intent of the regulation is to exempt an optional service, maintenance, and extended warranty contract from sales tax when the contract is optional to the buyer, and the charge is separately stated by the retailer to the purchaser.” Initially, the ruling stated that when a Dell invoice or acknowledgment “provided to a customer showed a total sales price for all items in the order and a unit price of ‘0.00[’] for each individual item, including the service contract and extended warranty, the sales tax was properly applied to the total sales price.” Directly applying the facts here, however, the letter concluded, “Since the service contract is optional to the buyer and a separate charge under ‘taxable amount’ is noted elsewhere on the invoice or acknowledgement as being for a 3rd party service contract, [Dell] Catalog should not have imposed the sales tax.”

In March 2007, while the appeal of the order denying the motion to compel arbitration was pending, defendants moved for summary judgment. In response, plaintiffs requested that the Tax Administrator for the Rhode Island Division of Taxation (the tax administrator) be notified of the proceeding because defendants' contentions on summary judgment implicated Rhode Island tax law. The tax administrator then moved to intervene in the case. The Superior Court justice permitted the tax administrator to intervene solely “for the purpose of appearing and being heard on the issues of subject matter jurisdiction, the proper interpretation and construction of tax regulations and statutes, and the application and constitutional validity of tax statutes.” The tax administrator moved to dismiss the case for lack of subject-matter jurisdiction. The Superior Court justice denied the motion to dismiss. The defendants and the tax administrator petitioned this Court for writs of certiorari to review the question of subject-matter jurisdiction, and we granted the petitions.

On December 14, 2009, this Court issued separate opinions on these preliminary issues. In DeFontes, 984 A.2d at 1073, we held that the Superior Court justice properly denied defendants' motion to compel arbitration because plaintiffs did not agree to be bound by the terms and conditions in the shrinkwrap agreement contained in the computer's packaging. In Long, 984 A.2d at 1081, we held that that the Superior Court had subject-matter jurisdiction over the DTPA claim and ancillary jurisdiction over the negligence claim. We remanded the case to the Superior Court. Id., at 1082.

With the arbitration and subject-matter jurisdiction issues resolved, the Superior Court turned to defendants' summary judgment motion. First, the Superior Court justice decided to consider only the facts and claims of the individual plaintiffs—not the purported class of plaintiffs—because the class had not yet been certified. Additionally, he noted that after his previous decision and this Court's opinions, the only claims that remained as to Long were those seeking equitable or declaratory relief because Long's claims under the DTPA and for negligence had been dismissed. Addressing those claims, the Superior Court justice concluded that the prayer to enjoin defendants from collecting improper taxes was moot because there was no evidence to suggest that defendants continue to improperly collect the tax. Accordingly, for purposes of summary judgment, the Superior Court justice considered “only the claims of improper collection of tax on the optional service contract, as evidenced in Ricci's acknowledgment of her purchase of a Dell computer, and the facts associated therewith.”

Next, the Superior Court justice concluded that Ricci should not have been charged a sales tax on her service contract. Although service contracts were not taxable in Rhode Island, Dell contended that Rhode Island Tax Regulation SU 00–126, which provided that “[t]he charge for the optional service, maintenance or extended warranty contract is not subject to tax when such charge is separately stated by the retailer to the purchaser,” nonetheless mandated that a tax be charged because Dell contends the “acknowledgement” it sent to Ricci did not separately state the service contract price. However, in its 2005 letter ruling, the Division of Taxation concluded that Dell's “acknowledgement” did, in fact, separately state the service contract price, and Dell should not have taxed the service contract. Based on the letter ruling, the tax regulation, and the opinions of this Court, in particular language from our opinion in Long, the Superior Court justice found that Dell improperly charged Ricci $16.31 in sales tax on the optional service contract.

Having concluded that Ricci was improperly taxed, the Superior Court justice next addressed Dell's legal arguments that it was nonetheless not liable under the DTPA or in negligence.⁷ Addressing the negligence claim, he concluded that “[a] seller's duty with regard to the collection of sales tax is to the State, not the consumer.” He reasoned that the seller is subject to state penalties for failing to properly remit sales taxes to the state. Further, he noted that there is little incentive for a seller to over-collect taxes. Comparatively, any injury to a consumer is relatively minor. Finally,...