Dell to pay $3M in class action over sales taxes

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Dude, you’re getting a settlement check.

In the early 2000s, Dell, a computer maker, was famous for its “Dude, you’re getting a Dell!” ad campaign. But earlier this year, it agreed to pay out more than $3 million to customers who paid North Carolina sales taxes on maintenance agreements they purchased around that time—from 1999 through 2008, officially—as part of a class action settlement agreement.

William Plyler of Miller Monroe & Plyler in Raleigh reports that the agreement brings a close to a dispute that has taken nearly 15 years to resolve. The lawsuit was filed in April 2003—back when that ad campaign was still a pop cultural sensation. Plyler said that although the case took a long time to resolve, it was “a simple case at its core.”

Dell collected sales and use taxes on optional maintenance agreements that it sold with its computers, contending that these were bundled transactions, and thus taxable. The plaintiffs argued that the transactions weren’t bundled because the agreements were priced separately, and often sold separately, and that during the time in question such maintenance contracts weren’t taxable in North Carolina. (State tax law has since changed on that point.)

Much of the dispute’s length stemmed from Dell’s negotiations with the state’s Department of Revenue seeking to recover taxes it collected from consumers and paid to the DOR. Dell also successfully enforced a motion to compel arbitration, which led to the dispute being adjudicated by the International Institute for Conflict Prevention and Resolution, or CPR. In a 2-1 decision, the CPR tribunal agreed with the plaintiffs and found that the maintenance agreements weren’t taxable. The tribunal granted final approval to the settlement agreement March 6.

Plyler said that the agreement was a claims-made settlement, meaning that Dell is required to pay only the class members that submitted a claims form. He said that 22 percent of eligible members did so, a high payout rate for a consumer class action settlement. The putative class counted 47,588 members, and had all of them made claims Dell would have been obligated to pay more than $13 million.

Ultimately, Dell will pay out $3,014,809, plus another $1,850,000 in attorneys’ fees and expenses. Fredric Ellis, Edward Rapacki and Joseph Makalusky of Ellis & Rapacki in Boston also represented the plaintiffs.

“It feels good to finally get it resolved,” Plyler said. “I had my doubts whether it ever would be resolved, but I’m pleased it came to a reasonable conclusion.”

John Shope of Foley Hoag in Boston, and Keith Kapp of Williams Mullen in Raleigh represented Dell and its subsidiaries. They directed inquiries to an in-house attorney for Dell, who did not return a phone call seeking comment on the settlement.

Follow David Donovan on Twitter @NCLWDonovan

SETTLEMENT REPORT – CLASS ACTION

Amount: $3,014,809 (plus $1,850,000 in attorneys’ fees and expenses)

Injuries alleged: Payment of sales taxes that were not owed

Case name: Starritt v. Dell Inc.; Dell Catalog Sales L.P.; Dell Marketing L. P.; BancTec, Inc.; and QualxServ, LLC

Court: Wake County Superior Court and the International Institute for Conflict Prevention and Resolution

Case Number: 03 CVS 5099

Arbitrators: René Stemple Trehy (chair) of Durham, Arch Allen of Raleigh and Donald Beskind of Durham

Date of settlement: March 6, 2018

Attorneys for plaintiffs: William Plyler of Miller Monroe & Plyler in Raleigh and Fredric Ellis, Edward Rapacki and Joseph Makalusky of Ellis & Rapacki in Boston

Attorneys for defendants: John Shope of Foley Hoag in Boston and Keith Kapp of Williams Mullen in Raleigh