New York Court of Appeals

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New York Court of Appeals upholds $300 million penalty in Tax False Claims Act suit

October 20, 2015

The New York Court of Appeals affirmed the imposition of the $300 million penalty against Sprint under the NYFCA for failing to collect sales tax on the interstate component of Sprint's bundled wireless phone services, on the grounds that the New York Tax Law statute is not preempted by federal law.

U.S. Chamber files amicus brief

July 21, 2015

The U.S. Chamber filed an amicus brief in support of Sprint Nextel Corp. in its appeal of a decision holding the company liable under the New York False Claims Act (NYFCA) for failing to collect sales taxes on the interstate component of its bundled wireless phone services. Although the New York Attorney General did not dispute that Sprint’s interpretation of the Tax Law was reasonable, he alleged that Sprint violated the NYFCA—i.e., that it committed fraud—because its position was contrary to the interpretation adopted by the Tax Department.

In its brief, the Chamber argues that the NYFCA is reserved for cases of a knowingly false claim, statement, or record and is not the proper mechanism for addressing interpretations of the Tax Law that are not objectively unreasonable. In addition, the Chamber argues that New York’s attempt to impose False Claims Act liability retroactively to punish conduct that occurred when the NYFCA did not apply to tax filings would violate the Ex Post Facto Clause.

Lewis J. Liman, Nowell D. Bamberger, and Robert A. Lawner of Cleary Gottlieb Steen & Hamilton LLP served as co-counsel for the U.S. Chamber of Commerce on behalf of the U.S. Chamber Litigation Center.

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