New York Case Still Open for Victory?

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On November 4, 2010, the Appellate Division of the Supreme Court of New York issued an opinion regarding, LLC.  The Court held that the New York affiliate nexus law does not violate the Equal Protection Clause, and is facially constitutional under the Due Process and Commerce Clauses.  With that said, the court has remanded the case to further explore whether the New York law violates the Due Process and Commerce Clauses as applied to, LLC and

The Sutherland law firm has released an informative Legal Alert regarding this matter.

Whether or not will prove that they lack Due Process and/or Commerce Clause nexus is yet to be seen; however, the opportunity still exists.

As far as other Internet retailers are concerned, I think there is a problem with New York's rule (North Carolina and Rhode Island as well). The problem is: in general, Internet retailers DO NOT choose affiliates based on the location of the affiliates to target a specific state. In other words, just because an affiliate is in New York, does not mean that the affiliate helps the Internet retailer create, enhance, or sustain a market in New York. Internet sales, unlike mail order sales, are not directed at one state. This is assuming the New York affiliate does not engage in any e-mail marketing, etc. or direct marketing to New York customers, and ONLY has a link on its website.

Hence, a New York resident affiliate with a link on its site to the Internet retailer is essentially providing electronic advertising or solicitation (depending on the situation, etc.) to the entire market across the country, and not to customers in any individual state.

Therefore, if all of the facts line-up, it may be possible to prove that the in-state affiliate is not creating substantial nexus for the Internet retailer.

Just some food for thought.

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