DeVries v. Experian Information Solutions, Inc.
- William Orrick
- 3:16-cv-02953
- U.S. District Court · Northern District of California
- 2
In DeVries v. Experian, Judge Orrick addressed settlement tax reporting and ordered the parties to consider separate checks and tax forms.
The order affected Experian Information Solutions, Inc., Sean Gilbert DeVries, Ronald Chinitz, and Plaintiffs’ Counsel by addressing how the settlement payment and Forms 1099 would be handled.
What happened
DeVries v. Experian Information Solutions, Inc. involved a settlement that required Experian to pay one lump sum to Sean Gilbert DeVries and Ronald Chinitz through their lawyers. The parties agreed how to divide the money between the named plaintiffs and their lawyers but disagreed about tax reporting.
Experian argued that it had to issue tax forms reporting the entire settlement amount to each named plaintiff and the lawyers. The plaintiffs argued that each person should be taxed only on the amount that person actually received. The court said it lacked enough analysis to decide what tax law required but identified a possible way to address the dispute.
Judge William H. Orrick ordered the parties to discuss using separate checks for the plaintiffs and their lawyers and issuing separate tax forms. If Experian objected, the court required it to file a short memorandum explaining why that approach, or another fair allocation, would not work; the plaintiffs could respond.
The detailed version
- DeVries v. Experian Information Solutions, Inc. · No. 3:16-cv-02953
- William Orrick
- Mar. 27, 2020
Background
The parties had negotiated a settlement agreement, but they reached an impasse over how Experian Information Solutions, Inc. would report the settlement to the Internal Revenue Service using Form 1099. The agreement called for Experian to make one lump-sum payment through its counsel of record to Sean Gilbert DeVries and Ronald Chinitz, referred to in the order as the Named Plaintiffs. The Named Plaintiffs and their counsel separately agreed how to allocate that payment between the plaintiffs and counsel for work performed for the putative class and the general public.
Parties’ Positions
Experian argued that it was required to issue Form 1099s to each Named Plaintiff and Plaintiffs’ Counsel for the full lump-sum settlement amount. The plaintiffs argued that the Named Plaintiffs and Plaintiffs’ Counsel should be taxed only on the amounts each actually received. The court stated that the plaintiffs’ position made sense as an equitable matter, but the parties had not supplied enough analysis for the court to determine what tax law required under the existing agreement.
Court’s Action
The court suggested that the Named Plaintiffs direct Plaintiffs’ Counsel to have separate checks sent to the Named Plaintiffs and to counsel, totaling the settlement amount. It stated that Experian should then issue separate Forms 1099. The court also suggested making a non-substantive amendment to the settlement agreement if necessary to allocate the proper portions through separate checks rather than one lump-sum payment to counsel.
The court ordered the parties to discuss whether to adopt that suggestion. If the suggestion was unacceptable, Experian had to file a memorandum of no more than five pages by April 8, 2020, explaining why it or another proposal that fairly allocated the tax burden was unworkable or improper. The plaintiffs could respond with a memorandum of similar length by April 20, 2020, and no reply was allowed without a further court order. Judge William H. Orrick did not decide the underlying tax-law question in this order.
Read the full 2-page opinion on CourtListener, the free public archive maintained by the Free Law Project.