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Farneth v. Wal-Mart Stores, Inc.

United States District Court, Third Circuit

December 30, 2013

BRIAN FARNETH, on behalf of himself and all others similarly situated, Plaintiff,
v.
WAL-MART STORES, INC., t/d/b/a Wal-Mart, Defendant.

OPINION

MARK R. HORNAK, District Judge.

Brian Fameth ("Mr. Farneth") brings this action to recover Pennsylvania state sales tax ("Sales Tax") that he paid to Defendant Wal-Mart Stores, Inc. ("Wal-Mart"). Mr. Farneth alleges that when he used a "buy one, get one" ("BOGO") coupon to get a discount on two (2) cans of Gillette Fusion shaving gel, Wal-Mart improperly charged him excess Sales Tax of twenty-one cents[1] on the original $2.97 per item purchase price of both items without first deducting the amount of the BOGO discount. On behalf of himself and a putative class of persons throughout Pennsylvania whom he alleges are owed refunds of similarly, allegedly improperly charged Sales Tax amounts by Wal-Mart, Mr. Farneth asserts claims for conversion and misappropriation (Count I), breach of constructive trust (Count II), unjust enrichment (Count III), and violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL") (Count IV), 73 Pa. Cons. Stat. §§ 201-1, et seq. [2] Mr. Farneth requests declaratory and injunctive relief, as well as monetary damages.

Pending before the Court are two motions - Wal-Mart's Motion to Stay the case pursuant to Pennsylvania law's primary jurisdiction doctrine, ECF No. 11, and Mr. Farneth's Motion to Remand the case to state court, ECF No. 16. After careful consideration of the parties' moving, opposition, and reply papers, and after oral argument on the Motions, for the reasons that follow, the Court denies Wal-Mart's Motion to Stay and grants Mr. Fameth's Motion to Remand, based on principles of comity.

I. BACKGROUND AND FACTS

On June 8, 2013, Mr. Farneth purchased two (2) cans of shaving gel at a Wal-Mart store in the Aspinwall neighborhood of Pittsburgh, Pennsylvania. Complaint ("CP"), at, ¶ 4. Each can of shaving gel cost $2.97. Id. at ¶ 8. At the time of purchase, Mr. Fameth presented the Wal-Mart cashier with a BOGO coupon. Id. at ¶ 4. The Wal-Mart cashier accepted the coupon and charged Mr. Farneth a total of $2.97 for the two cans of shaving gel. Id. at ¶¶ 4, 6, 8. However, according to his receipt, Wal-Mart charged Mr. Farneth Sales Tax of $0.42 on the sale, computed by multiplying the applicable 7 percent Sales Tax by the original sale price of the two cans of shaving gel of $5.94. Id. at ¶¶ 7-8.

The applicable Pennsylvania Department of Revenue Regulation ("Regulation") provides:

Amounts representing on-the-spot cash discounts, employee discounts, volume discounts, store discounts such as "buy one, get one free, " wholesaler's or trade discounts, rebates and store or manufacturer's coupons shall establish a new purchase price if both the item and the coupon are described on the invoice or cash register tape.

61 Pa. Code § 33.2(b)(2) (2013). Mr. Farneth contends that because his receipt described the items he purchased along with the coupon that applied to his purchase, that Pennsylvania tax Regulation required Wal-Mart to deduct the amount of the coupon from the taxable portion of the purchase price before assessing Sales Tax. CP ¶¶ 12-13. Therefore, according to Mr. Farneth, Wal-Mart should have charged him Sales Tax on $2.97 instead of $5.94. Id. at ¶¶ 8-13. As the basis for his putative class action suit, he further alleges that as a common practice, Wal-Mart overcharges Sales Tax in this same fashion to customers who present similar BOGO discount coupons. ld. at ¶¶ 13-14.

Wal-Mart, on the other hand, contends that a 2005 staff opinion letter from the Pennsylvania Department of Revenue's Office of Chief Counsel in essence blessed the process Wal-Mart used to charge Sales Tax on the involved shaving gel by advising Wal-Mart that it may not, when using its then-current point-of-sale technology, deduct the value of a manufacturer's coupon before calculating sales tax. ECF No. 11 at ¶¶ 5-6. The parties dispute the current validity and applicability of that staff opinion letter.

Mr. Farneth originally brought this putative class action in the Allegheny County Court of Common Pleas. ECF No. 1 at 1. Wal-Mart timely removed the case to this Court on the basis of diversity pursuant to 28 U.S.C. § 1332, as amended by the Class Action Fairness Act of 2005 ("CAFA"), and as authorized by 28 U.S.C. § 1453. Wal-Mart then filed a Motion to Stay the case pursuant to Pennsylvania's primary jurisdiction doctrine, ECF No. 11, and a Brief in Support of its Motion. ECF No. 12. Mr. Farneth filed a Response in Opposition with an Alternative Motion to Remand the case to state court, ECF No. 16, along with a Brief in Opposition to Wal-Mart's Motion to Stay and in Support of its Alternative Motion to Remand. ECF No. 17. Wal-Mart next tiled a Reply Brief as to its Motion to Stay, ECF No. 19, and a Response in Opposition to Mr. Farneth's Motion to Remand, ECF No. 20. Mr. Fameth tiled a Sur-Reply Brief as to Wal-Mart's Motion to Stay. ECF No. 24. Finally, at the Court's request, after oral argument on the Motions, both parties filed Supplemental Briefs further explaining their positions on their respective motions.[3] ECF Nos. 26 and 27.

II. DISCUSSION

Statutes conferring federal jurisdiction, such as CAF A, "should be read with sensitivity to federal-state relations' and wise judicial administration.'" Levin v. Commerce Energy, Inc., 560 U.S. 413, 423 (2010) (citing Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996)). The Tax Injunction Act ("TIA") and its attendant principles of comity counsel such sensitivity by this Court in deciding whether exercising federal jurisdiction over the case is appropriate. Pursuant to the TIA, "[t]he district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." 28 U.S.C. § 1341.[4]

Additionally, the "more embracive" doctrine of comity applicable to state taxation cases "restrains federal courts from entertaining claims for relief that risk disrupting state tax administration." Levin, 560 U.S. at 417 (2010) (citing Fair Assessment in Real Estate Ass'n, Inc. v. McNary, 454 U.S. 100, 102 (1981)). In Great Lakes Dredge & Dock Co. v. Huffman, the Supreme Court illustrated the rationale behind the comity doctrine:

Interference with state internal economy and administration is inseparable from assaults in the federal courts on the validity of state taxation, and necessarily attends injunctions, interlocutory or final, restraining collection of state taxes. These are the considerations of moment which have persuaded federal courts of equity to deny relief to the taxpayer - especially where the state, acting within its constitutional ...

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