The Lawletter Vol 38 No 5

Paul Ferrer, Senior Attorney, National Legal Research Group

"Remittitur" is defined as "[a]n order awarding a new trial, or a damages amount lower than that awarded by the jury, and requiring the plaintiff to choose between those alternatives."  Black's Law Dictionary "remittitur" (9th ed. 2009).  In essence, if the trial court determines that the jury's award is grossly excessive, then it "may condition a denial of the motion for a new trial upon the filing by the plaintiff of a remittitur in a stated amount," thereby giving the plaintiff "the option of either submitting to a new trial or of accepting the amount of damages that the court considers justified."  11 Charles A. Wright, Federal Practice and Procedure § 2815 (3d ed. & Westlaw database updated Apr. 2013).

In federal court, this practice goes all the way back to 1822, when Justice Story, sitting at circuit, decided that if the jury committed a "gross error" in awarding excessive damages, the trial court, in an "exercise of discretion full of delicacy and difficulty," could either grant a new trial or remit the award.  Blunt v. Little, 3 F. Cas. 760, 761‑62 (C.C.D. Mass. 1822) (Story, C.J.).  If the plaintiff were to accept the remittitur, then "the court ought not to interfere farther."  Id. at 762.  The practice was thereafter accepted by the full Court and applied in the lower federal courts.  See, e.g., N. Pac. R.R. v. Herbert, 116 U.S. 642, 646‑47 (1886); 11 Wright, supra, § 2815 (collecting representative cases).

The Lawletter Vol 38 No 4

Tim Snider, Senior Attorney, National Legal Research Group

Under the "first sale doctrine," the owner of a copyrighted item, such as a book or a recording, is free to use it, sell it, lend it, or give it away under whatever conditions the owner chooses to impose.  This doctrine derives from a long line of jurisprudence, see Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908), and is now embodied in the Copyright Act, 17 U.S.C. § 109(a) ("[T]he owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.").  Until now, the extent of the application of the first-sale doctrine to books sold overseas and then imported into the United States remained an open question.

Kirtsaeng v. John Wiley & Sons, 133 S. Ct. 1351 (2013), has now resolved that question.  John Wiley & Sons, Inc., an academic textbook publisher, often assigns to its wholly owned foreign subsidiary (Wiley Asia) rights to publish, print, and sell foreign editions of Wiley's English-language textbooks abroad.  Wiley Asia's books state that they are not to be taken (without permission) into the United States.  When Supap Kirtsaeng moved from Thailand to the United States to study mathematics, he asked friends and family to buy foreign edition English‑language textbooks in Thai book shops, where they sold at low prices, and to mail them to him in the United States.  He then sold the books, reimbursed his family and friends, and kept the profit.  Wiley sued Kirtsaeng, claiming copyright infringement. 

Wiley prevailed in the district court and in the Second Circuit.  The Supreme Court reversed.  The majority in a 6-3 decision concluded that nothing in the language of the statute would require that copyrighted works imported from overseas should be treated any differently than goods that are initially sold domestically.  Furthermore, as a practical matter, an application of the Copyright Act that would require buyers of copyrighted works to ascertain their provenance is simply unworkable.  The volume of foreign trade in which the United States engages is simply too large for enforcement to be feasible.  The burden of requiring those importing copyrighted goods into this country for a variety of purposes, such as exhibitions of works of art or acquisitions by museums, to seek out the copyright owners to obtain a license would be onerous.  Thus, an interpretation of the Copyright Act that would treat goods initially acquired outside the United States differently from those that are acquired domestically, for purposes of the first-sale doctrine, would be unenforceable.

July 11, 2013

Jeremy Taylor, Senior Attorney, National Legal Research Group

The Court of Appeals of Wisconsin recently applied the economic loss rule in a products liability action by a homeowner's property insurer against the manufacturer of an allegedly defective water softener that leaked and damaged drywall, flooring, and woodwork in the home.  See State Farm Fire & Cas. Co. v. Hague Quality Water, Int'l, 2013 WI App 10, 826 N.W.2d 412.  The insurer, State Farm, brought only tort claims against the manufacturer.  The manufacturer defended on the basis that Wisconsin's economic loss doctrine precluded recovery under the plaintiff's theories.  The trial court granted the manufacturer's motion for summary judgment.  The court of appeals rejected the manufacturer's argument, holding that the insurer was entitled to proceed under its tort theories.

At the threshold, the court of appeals noted that the economic loss doctrine bars recovery of purely economic losses through tort remedies when the only damage is to the product purchased by the consumer.  Hence, the doctrine does not apply when a defect in the product causes personal injury or damage to "other property."  It was the "other property" exception with which the court was concerned in the case at hand.

The court noted that Wisconsin engages in a two-part analysis to determine whether damaged property constitutes "other property," so as to allow the pursuit of tort remedies.  First, courts consider whether the defective product and the damaged property are part of an "integrated system."  If they are, then the damaged property is considered to be the product itself and is not "other property."  If they are not, the court then examines the expected function of the product and asks whether the purchaser should have foreseen that the product could cause the damage at issue.  If so, then the damaged property is not "other property."  In order to be "other property," the damaged property must survive both tests.

As to the integrated-system test, the court of appeals concluded that the consumer's water softener was not part of an integrated system, because it had a function apart from the drywall, flooring, and woodwork in the home.  In other words, in order to come within the economic loss doctrine, a defective product must be part of a larger system, and if it lacks a function apart from its value in such a system, it is not "other property" for damage to which an action will lie in tort.  The court noted that property has been deemed to be part of an integrated system precluding a tort recovery when, for example, it consisted of cement that was part of pavers that had been damaged, a replacement gear in a printing press, and windows in a home.

Brett R. Turner, Senior Attorney, Family Law

On June 26, 2013, the U.S. Supreme Court held in United States v. Windsor, No. 12-307, 2013 WL 3196928 (U.S. June 26, 2013), that section 3 of the Defense of Marriage Act, 1 U.S.C. § 7, is unconstitutional.  Section 3 provides that for purposes of federal law, same-sex marriages are not recognized.  Windsor held that in determining the marital status of same-sex couples, as in determining the marital status of opposite-sex couples, the federal government must defer to state law.

While state law is now controlling, many situations will arise in which state law is conflicting.  This short note will take a preliminary look at choice-of-law issues in a post-Windsor world.  The note is based upon a morning's worth of research, but not upon an exhaustive review of the entire field.  As additional relevant points appear, the note will be kept updated. 

At a very minimum, Windsor must mean that when a same-sex couple gets married and continues to live in a state that recognizes same-sex marriage, they have a valid marriage under federal law.  Thus, they are entitled to federal benefits available to married persons, such as the right to file a joint tax return. 

What if a same-sex couple gets married in a state that allows same-sex marriage but moves to a state that does not?  Under federal tax law, "[f]or the purpose of establishing eligibility to file a joint Federal income tax return, the marital status of the two individuals is to be determined under the laws of the State of their residence."  Von Tersch v. Comm'r, 47 T.C. 415, 419 (1967) (citing Rev. Rul. 58‑66, 1958‑1 C.B. 60); Lipton v. Comm'r, T.C. Summ. Op. 2007‑36, 2007 WL 686349, at *4 (2007). 

The practical setting of Revenue Ruling 58-66 was common-law marriage.  Most American states have abolished common-law marriage, but a small number of states retain it.  See generally Nadine E. Roddy, Interstate Recognition of Common Law Marriages, 9 Divorce Litig. 200 (1997).  Revenue Ruling 58-66 stated: 

The marital status of individuals as determined under state law is recognized in the administration of the Federal income tax laws. Therefore, if applicable state law recognizes common‑law marriages, the status of individuals living in such relationship that the state would treat them as husband and wife is, for Federal income tax purposes, that of husband and wife.

The foregoing position of the Internal Revenue Service with respect to a common‑law marriage is equally applicable in the case of taxpayers who enter into a common‑law marriage in a state which recognizes such relationship and who later move into a state in which a ceremony is required to initiate the marital relationship. Accordingly, a taxpayer who enters into a common‑law marriage in a state which recognizes such marriages is entitled, under the provisions of section 151(b) of the Internal Revenue Code of 1954, to an exemption of $600 for his common‑law wife in making a separate income tax return, provided that, for the calendar year in which the taxable year of the taxpayer begins, she has no gross income and is not the dependent of another taxpayer. Also, for the purpose of filing a joint income tax return under section 6013(a) of the Code, a common‑law wife in a state which recognizes such marriages will be considered to be the taxpayer's spouse. 

The Lawletter Vol 38 No 4

Jim Witt, Senior Attorney, National Legal Research Group

On Tuesday, October 23, 2012, the Court of Appeals of New York, in a 4‑3 decision, ruled that lap dances do not qualify for the same sales tax exemption as do other "dramatic or musical arts performances," such as a Madonna concert or a Broadway show.   677 New Loudon Corp. v. State Tax Appeals Tribunal, 979 N.E.2d 1121 (N.Y. 2012).

The court's ruling stemmed from a 2005 audit of the Nite Moves strip club in Latham, New York.  After an investigation, the New York Tax Appeals Tribunal demanded $124,921, based on unpaid sales taxes on cover charges and "performance fees," which were construed to mean fees for private dances.  The petitioner/appellant, the operator of an adult "juice bar," contended that the admission charges and private dance performance fees that it collected from patrons were exempt from state sales and use taxes.  The court of appeals agreed with the appellate division's ruling that the petitioner had failed to meet its burden of proof that a tax exemption applied to those charges.

The portion of the sales tax in question imposes a sales tax on "'[a]ny admission charge' in excess of 10% for the use of 'any place of amusement in the state.'"  Id. at 1122 (quoting N.Y. Tax Law § 1105(f)(1)).  The legislature defined places of amusement that are subject to this tax to include "[a]ny place where any facilities for entertainment, amusement, or sports are provided."  Id. (quoting N.Y. Tax Law § 1101(d)(10)).  As the court of appeals observed, the tax therefore applies to a vast array of entertainment, including attendances at sporting events such as baseball, basketball or football games; collegiate athletic events; stock car races; carnivals and fairs; amusement parks; rodeos; zoos; horse shows; arcades; variety shows; magic performances; ice shows; aquatic events; and animal acts.  Plainly, no specific type of recreation is singled out for taxation.

The court went on to explain that the legislature had created the exemption from taxation for admission charges to "dramatic or musical arts performances," N.Y. Tax Law § 1105(f)(1), for the purpose of promoting cultural and artistic performances in local communities.  The petitioner argued that performances regarded as "adult entertainment" qualified for the exemption because exotic stage and couch dances were musical arts performances.  The court, pointing out that it was the petitioner/taxpayer's burden to prove the applicability of any exemption from taxation, ruled that a determination by the Tax Appeals Tribunal could not be overturned unless "erroneous, arbitrary or capricious."  979 N.E.2d at 1123 (quoting Grace v. N.Y. State Tax Comm'n, 332 N.E.2d 886 (N.Y. 1975)).  The court found that given the fact that the performances in question were carried out in "private rooms," the petitioner had failed to prove that the performances qualified as choreographed dance routines presented in a stage performance. 

The court further concluded that it was not arbitrary, capricious, or an error of law for the Tax Appeals Tribunal to have discredited the petitioner's expert witness's opinion that the private performances qualified for the exemption because they were the same as the routines presented on the main stage.  The evidence showed that the witness had neither seen nor had personal knowledge of what occurred in the private areas.  As the court stated:

[S]urely it was not irrational for the Tax Tribunal to conclude that a club presenting performances by women gyrating on a pole to music, however artistic or athletic their practiced moves are, was also not a qualifying performance entitled to exempt status.

The Lawletter Vol 38 No 4

Brett Turner, Senior Attorney, National Legal Research Group

     Data collected by the government have traditionally been presented to the public through official government publications.  As the world moves deeper into the Age of the Internet, however, governments have increasingly stopped printing data reports.  Instead, data reports are often published on an official government website.  This fundamental change poses an evidentiary challenge for parties seeking to rely upon government-collected data.

     A good example from the field of family law is the consumer price index ("CPI"), an index of price data produced monthly by the federal Bureau of Labor Statistics ("BLS").  It is not uncommon for a support provision in a divorce settlement to include a provision increasing the payments periodically, based upon changes in the CPI.  Some states do not allow the court to insert such an escalator clause into its own order, but settlement agreements containing self-modifying support provisions are generally enforceable.  See In re Marriage of Strieby, 255 P.3d 34 (Kan. Ct. App. 2011); West v. West, 891 So. 2d 203 (Miss. 2004); Payne v. Payne, 635 S.W.2d 18 (Mo. 1982).

     When an escalator clause is based upon the CPI, how can the CPI be proven?  This question was presented to the North Carolina Court of Appeals in the unpublished decision of Blackburn v. Bugg, 723 S.E.2d 585, 2012 WL 1332728 (N.C. Ct. App. 2012) (unpublished table disposition).  The plaintiff in that case went to the website of the BLS, http://stats.bls.gov, and simply printed a list of the CPI for different years and months.  The defendant objected that the printout had not been properly authenticated and was in any event inadmissible hearsay.

     The trial court disagreed, and the appellate court affirmed:

[W]e discern no abuse of discretion in the trial court's admission of Plaintiff's CPI evidence.  Plaintiff offered testimony, including the exhibits at issue, to prove the amount of CPI payments owed by Defendant at the time of trial. Defendant offered no evidence of his own CPI calculations, nor evidence to dispute Plaintiff's calculations.  Plaintiff's exhibits consisted of computer printouts—which Plaintiff testified she obtained from a website operated by the United States Department of Labor—and her own handwritten calculations, which she computed using the CPI figures obtained from the government website.  Plaintiff's testimony, in addition to the "UNITED STATES DEPARTMENT OF LABOR BUREAU OF LABOR STATISTICS" heading displayed on the printouts, was sufficient to prove that the computer printouts were what Plaintiff purported them to be.  See N.C. Gen.Stat. § 8C-1, Rule 901 (2011).  Moreover, we note that the CPI information set forth in the computer printouts is public information readily available and subject to judicial notice.  See N.C. Gen.Stat. § 8C-1, Rule 201 (2011).

2012 WL 1332728, at *4.

     To summarize, the computer printout was properly authenticated by the plaintiff's testimony that she had printed the document from an official government website.  The official heading at the top of the document was also evidence that the document was what it claimed to be.