An opinion was issued on Friday in the United States Court of Appeals for the Third Circuit by a three-judge panel. The initial class action complaint was filed by Christopher Lisowski against Walmart Stores, Inc.
Lisowski said that he purchased two six-packs of 5-Hour Energy from Walmart, where they charged him a 7% state and local sales tax. The tax totaled $1.88, which led Lisowski to file a class action in which he alleged that 5-Hour Energy drinks are dietary supplements which should be exempt from sales tax under Pennsylvania law. Lisowski’s class action complaint cited claims for conversion, constructive trust, and deceptive trade practices.
Following Lisowski’s filing of the suit, Walmart removed the suit under the Class Action Fairness Act since the proposed damages were over $5 million. Lisowski then filed a motion to remand, specifically citing that the Tax Injunction Act and principles of comity required remand but the district court dismissed the complaint for failure to state a claim, and Lisowski appealed.
Judges Joseph Greenaway, Jr., David Porter, and Peter Phipps, in their opinion, explained that if the tax charged by Walmart was an unambiguous tax, then the court lacks jurisdiction to enjoin its collection. However, if the tax was fraudulent, the court does have jurisdiction.
Judge Porter, author of the opinion, explains that “Lisowski’s argument requires that Walmart’s charge is a tax when convenient, and not a tax when inconvenient.” For example, the plaintiff alleges that the charge is not a tax, yet demons a remand under the Tax Injunction Act. Thus, the court affirmed the district court’s holding that the facts alleged in the notice of the removal did not implicate the Tax Injunction Act, as Lisowski had argued.
The court affirmed the trial court’s dismissal of each claim. The plaintiff’s Unfair Trade Practice and Consumer Protection Law claim was dismissed for failure to allege justifiable reliance, while his claims for conversion, unjust enrichment, and breach of constructive trust were dismissed since “Lisowski has an exclusive statutory remedy under the Tax Reform Code.”
Finally, the panel explained that although Lisowski argued that the district court erred when dismissing his complaint with prejudice, Lisowski never requested leave to amend his complaint, which justifies dismissal with prejudice.