A federal judge has dismissed a proposed class action lawsuit filed against the multilevel marketing company LuLaRoe for alleged unfair collection of sales taxes. But the decision could still be appealed.
Anchorage resident Katie Van claimed that she was charged sales taxes on clothing purchases, even though Anchorage and Alaska do not collect such taxes.
U.S. District Court Judge H. Russel Holland, in his 16-page decision issued March 1, determined that Van did not have standing in the case or any legal recourse because she was not financially injured. Holland determined that Van was already refunded $531.25 in overcharged sales taxes before the lawsuit was even filed, and she was not eligible for any damages.
Van also claimed at least $3.76 in interest on her refund, but Holland ruled that the amount was so insufficient that it would also not affect her standing in the case.
The lawsuit was originally filed as a potential class action that would’ve included all affected Alaskans as potential plaintiffs. But Holland’s decision effectively prevents the case from moving ahead, at least for now.
James Davis, an attorney for the Northern Justice Project which filed the lawsuit on behalf of Van, did not immediately return messages seeking comment. But he told Law360.com that he thought the judge’s ruling “was just simply wrong.” Davis also said other companies would never be discouraged from overcharging customers if all they had to do is eventually return the money they took.
Steven Graham, an attorney representing LuLaRoe, expects Davis to appeal the decision to the 9th U.S. Circuit Court of Appeals. But Graham anticipates the appellate court will uphold Holland’s decision because a similar case was already litigated in Pennsylvania federal court and then dismissed last September.
LuLaRoe said a previous version of their sales tax automation software had trouble keeping track of 20,000 different taxing jurisdictions nationwide. But the company said that was fixed.
According to court filings, the company then refunded $8.4 million of over-collected sales tax to all their customers. Over $255,000 was returned just to Alaskans.