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Tax Law

It’s All About the Paper – Delaware Supreme Court Holds Overstock Not Liable for False Claims and Reporting Act Damages for Failure to Report Unclaimed Gift Card Balances

The Delaware Supreme Court reversed a lower court’s ruling and held that Overstock.com was not liable for nearly $7 million in damages because there was insufficient evidence to show that Overstock violated the Delaware False Claims Act by not reporting credit card unredeemed balances. The Plaintiffs – Delaware and the whistleblower who brought this case under Delaware’s whistleblower law – argued that Overstock engaged in a scheme to avoid paying abandoned gift card balances to the State because Overstock did not file escheat reports. The court disagreed, holding that in order for Overstock to be found liable for making a reverse false claim, it must have submitted a false record or statement that gave the State the impression that Overstock either did not owe the State money or owed the State less money than Overstock was required to pay. “The absence of a record or statement cannot form the basis of a reverse false claim…,” the Court ruled. Accordingly, the Court held that the lower court’s jury instruction “that the failure to file an escheat report in the face of an obligation to do so was the equivalent of a false record of statement for purposes of a reverse false claims” was a reversible error.

State of Delaware ex. rel. William Sean French, C.A. No. N13C-06-289 (Del. 2020)