US Supreme Court:
Back Pay Subject to Current Tax Rate.
In an unanimous ruling in favor of the Internal Revenue Service,
the US Supreme Court has ruled that back wages are subject to
the tax rates in effect during the year they are paid. The IRS
argued that it would be easier to charge one rate on the entire
amount due, than to go back and figure out which old tax rates
applied to what part of a lump sum settlement or award. The court's
decision affects Social Security (FICA) and unemployment taxes
(FUTA) on lump-sum labor and discrimination settlements and awards.
The subject case arose out of the settlement won by the major
league players' union against 26 baseball teams for collusion
to stop the escalation of the salaries of free agents. US
vs. Cleveland Indians Baseball Co., No. 00-203, U.S.S.C.,
(April 17, 2001).
No Pass-Through of Losses Because Taxpayers'
Loan Participation Agreement Essentially a Guarantee of Loan.
Taxpayers' loan participation agreement with bank for a loan
to their Sub-S Corporation was correctly treated as a guarantee,
denying taxpayers the ability to write off losses of Sub-S corporation
to the extent of the loan participation agreement. Taxpayers
made no loan to corporation, their guaranty was not an "investment"
for purposes of permitting pass-through of corporate losses,
and the significance of the loan participation agreement was
to guarantee the loan up to extent of the loan participation
agreement. Grojean
v. Commissioner of Internal Revenue, No. 00-2252, 7th
Cir. Ct. App. (April 13, 2001). U.S. Tax Ct. Aff’d. To read
the case, go to http://www.ca7.uscourts.gov/
and input case number 00-2252.
Where there's Smoke....... Loss of Soybeans
Insured Under Policy. Even though no one saw flames,
where farmer's insurance policy excluded coverage for certain
kinds of damage to crops, but provided coverage if a fire ensued,
heat damaged soybeans were covered by the policy, where the policy
failed to exclude coverage of damage to beans due to heat. Bruce
Oakley vs. Farmland Mutual Insurance Co., No 00-1655
(8th Cir. Ct.App, April 11, 2001).
Non-Compete Does Not Apply to Friends
and Family.
Insurance agent who had relationships with friends and family
prior to his employment for employer, whether or not he sold
them insurance before then, was entitled to continue to sell
to them in spite of non-compete agreement, when he left and went
to work for different employer. Former employer had no protectable
interest in customers known to former employee before his employment
with them. Com-Co
Insurance Agency, Inc. vs. Service Insurance Agency and William
J. Abplanalp, Jr., 1-00-1643, Ill. App. Ct.,1st District,
1st Division, April 16, 2001.
Insurer Entitled to Credit for Payment
of Lost Inventory Against Business Interruption Loss Claim. Since insurer paid insured regular sales price for
goods damaged by flood, insured received net profit and fixed
charges, and therefore suffered no loss of earnings. As a result,
insurer is entitled to credit for such payment against insured's
business interruption insurance loss claim. Lyon
Metal Products, LLC vs. Protection Mutual Insurance Co., #
2-00-0587, Ill. App. Ct., 2nd District, April 16, 2001.
Opposition to UCITA Growing: Iowa, North
Dakota & Oregon Join New York in Passing anti-UCITA Legislation.
Designed as an update to the sales of goods provisions
of the Uniform Commercial Code, UCITA was drafted to address
the modern concepts of software and computers. Proponents of
the law, including software vendors, say that it is good for
consumers because it spells out their rights and responsibilities.
Opponents, including consumers, say that the law avoids the concept
of protection for consumer sales by making such transactions
a temporary rental of a license to use software, and would permit
vendors to disclaim warranties, repossess software with no notice,
prohibit consumers and the press from saying negative things
about their software, among other provisions. Last month, we
reported that UCITA died a quick death in Illinois. Although
the law has also been introduced in Arizona and Texas, to date,
only Virginia and Maryland have adopted UCITA, and Virginia has
already amended its statute. See the article at IT
World.com , April 13, 2001.
European Union:
EU About to Impose Value Added Tax (VAT) on Net Sales Outside
the EU to EU Citizens.
While they are working out the details of how they will share
the revenues, the 15 member-states of the European Union are
close to agreeing upon a tax on digital
sales made over the Internet outside the European Community to
EU citizens. The tax would force US e-tailers to charge and collect
VAT of perhaps as much as 17.5% on music and software downloads
purchased by EU citizens on behalf of the European Union, which
surely will not make US etailers very happy. As reported in The
Register on April 21, 2001.
Email I: Use
of Email, Chat Implies Consent to Recording. Even though they were private communications protected
by Washington State statute, a defendant's use of email, knowing
that such messages would be recorded on the recipient's computer,
impliedly consented to the recording of the messages, so that
their use by the police did not violate the privacy law. Washington
vs. Townsend, Wash. Ct. App., Div. 3, No. 19304-7-III, (April
5, 2001).
Electronic Commerce & Law Report , April 18, 2001.
Email II:
Employer's Search Through Employee's Stored Emails Not Violation
of Wiretap Laws. Finding that wiretap laws are violated
only when an e-mail is intercepted from "intermediate storage"
or "back-up protection storage" -- both of which automatically
occur during the course of transmission - or if the e-mail is
viewed before the intended recipient has a chance to open it
- a Pennsylvania Federal District Court Judge has ruled that
reviewing email messages in post-transmission storage does not
violate wiretap laws. Fraser
vs. Nationwide Mutual Insurance Co., USDC, ED. Pa, No.
98-CV-6726, (March 27, 2001).
UK Solicitors Seek to Practice in US.
The Law Society of England and Wales is preparing
to ask New York State to relax its requirements for the requalification
of U.K.
solicitors who want to practice New York law. The move resumes
an ongoing debate that stems in part from divergent cultural
notions of what a legal education entails. Currently, New York
makes a distinction between qualified solicitors with undergraduate
degrees in law, who are allowed to take the New York bar exam
immediately, and those with undergraduate degrees in non-law
subjects, who must take 20 credits of course work (usually one
year) at a law school in the United States before being permitted
to sit for the bar exam. The UK seeks to have all solicitors
treated equally. As reported in the New York Law Journal, April
11, 2001.