Arbitration Awards: Not Vacated for Manifest Disregard of Evidence | Ruskin Moscou Faltischek, P.C.
The narrow window that had opened to permit vacating arbitration awards based on a review of the evidence is now officially shut.
The U.S. Court of Appeals for the Second Circuit made it abundantly clear in the recent case of Wallace v. Buttar that a party may no longer seek to vacate an arbitration award on the ground of manifest disregard of the evidence.
When the Federal Arbitration Act (FAA) was enacted in 1925, the law gave great deference to the determinations made by arbitrators. The statute set forth only four grounds for vacating an arbitration award, and these limited grounds deal only with an arbitrator maintaining a bias, failing to be impartial, exceeding his or her given powers, or if an award was procured by corruption, fraud or undue means. See 9 USC §10(a). When it came to applying legal doctrine and evaluating facts, the awards were immune from challenge.
However, over time, this led to circumstances in which the courts found themselves powerless to vacate an arbitration award when an arbitrator’s conduct was clearly egregious, but did not specifically fit into one of the four grounds set forth in the FAA. In an effort to address these situations, the U.S. Supreme Court in Wilko v. Swan introduced the doctrine of "manifest disregard of the law" as grounds for vacating an arbitration award. The Second Circuit subsequently followed and developed that doctrine. See, e.g., Carte Blanche (Singapore) Pte., Ltd. v. Carte Blanche Int’l, Ltd.; Merrill Lynch, Pierce, Fenner & Smith v. Bobker.
The doctrine holds that an arbitration award can be vacated if the following two-prong test is satisfied: (1) if the arbitrators knew of a governing legal principle yet refused to apply it or ignored it; and (2) the law ignored was well-defined, explicit and clearly applicable to the case. See, Bobker, supra. The Second Circuit strongly emphasized that the doctrine is only to be used in rare circumstances. See Gov’t of India v. Cargill Inc.
Wallace v. Buttar illustrates the limits on the manifest disregard of the law doctrine. Wallace held that as long as there is a colorable justification that can be inferred for the legal conclusion made by the arbitrators, the award must be upheld, even if the justification is based on an error in law or fact.
The doctrine does not apply if the arbitration panel simply misapplies the law or makes a decision that is in contradiction with the established law. See, Hoeft v. MVL Group, Inc. Rather, a showing must be made that the arbitrators were made aware of a law that is well defined, explicit and clearly applicable to the case, and either refused to apply it or ignored its existence. See, Wallace v. Buttar, supra. For example, when a party fails to properly make the arbitrators aware of a supposed well-defined, explicit and clearly applicable law, the arbitrators’ error in not applying the correct law will not warrant vacating an award. Id. As illustrated above, the applicability of this judicially created doctrine is severely limited.
What about the instance of a court vacating an award on the ground of manifest disregard of the evidence? The confusion with regard to this doctrine has been linked to the case of Halligan v. Piper Jaffray, Inc. In Halligan, the Second Circuit vacated an arbitration award in an employment discrimination case and, in so doing, evaluated the evidence from the arbitration hearing and concluded that "in view of the strong evidence that [Mr.] Halligan was fired because of his age . . . ," the arbitration panel’s determination that there was no discrimination " . . . ignored the law or the evidence or both."
Since the Halligan decision, many parties wishing to vacate arbitration awards have seized on this language and argued that arbitration awards that are contrary to "strong evidence" should be vacated. In fact, several district court decisions in New York, which relied on Halligan, vacated arbitration awards for "ignoring the law or the evidence or both." See, Hakala v. Deutsche Bank AG; Gwynn v. Clubine; Ono Pharmaceutical Co., Ltd., v. Cortech, Inc.; Tripi v. Prudential Securities, Inc.; Raiola v. Union Bank of Switzerland LLC; GFI Securities LLC v. Labandeira; McDaniel v. Bear Sterns & Co.
After witnessing the broadening of the scope and circumstances for vacating arbitration awards arising out of the language in the Halligan case, the Second Circuit made attempts to narrow the Halligan court’s holding. In GMS Group, LLC v. Benderson, the Second Circuit stated that Halligan dealt with certain due process issues that were unique to employment discrimination cases, and that since such concerns did not apply to a securities fraud claim, the manifest disregard of the evidence doctrine was inapplicable. Earlier, in Westerbeke Corp. v. Daihatsu Motor Co., Ltd., the Second Circuit characterized as dicta the language in Halligan that dealt with the doctrine of manifest disregard of the evidence.
Now, once and for all, the Second Circuit’s decision in Wallace v. Buttar appears to have closed the perceived opening that an arbitration award can be vacated due to a manifest disregard of the evidence. In Wallace, a party instituted an arbitration proceeding before the NASD, accusing his broker of fraud in connection with the investing and trading of stock. The party was successful in the arbitration and was awarded compensatory damages amounting to over $1 million. However, the district court vacated the award by holding that the arbitration panel violated both the doctrines of manifest disregard of the law and the evidence. See, Wallace v. Buttar.
In responding to the district court’s holding that the arbitration award violated the doctrine of manifest disregard of the evidence, the Second Circuit adopted the language used in Success Sys. Inc. v. Maddy Petroleum Equip., Inc., and squarely held that " . . . the Second Circuit does not recognize manifest disregard of the evidence as a proper ground for vacating an arbitrator’s award."
With this holding, there can no longer be any doubt as to whether the doctrine of manifest disregard of the evidence can be used to vacate an arbitration award in this circuit. In fact, the Second Circuit further held that the only circumstances in which a court is allowed to evaluate the evidentiary record is " . . . for the purpose of discerning whether a colorable basis exists for the [arbitration] panel’s award so as to assure that the award cannot be said to be the result of the panel’s manifest disregard of the law." Wallace v. Buttar, supra.
In the months since the Second Circuit’s decision in Wallace v. Buttar, the district courts in New York have closely followed its holding, confirming the death knell of the once viable doctrine of manifest disregard of the evidence as a basis for vacating an arbitration award. See Mooring-Brown v. Bear, Stearns & Co.; Small Family Limited Partnership v. RBC Dain Rauscher, Inc.; Paterson v. Lehman Brothers, Inc.; Ruei-Chan v. Pierce.
The firm’s Litigation Department can be reached at 516-663-6587.


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An Act to amend the law relating to the jurisdiction of courts in the United Kingdom to make orders with regard to the custody of children; to make provision as to the recognition and enforcement of such orders throughout the United Kingdom; to make further provision as to the imposition, effect and enforcement of restrictions on the removal of children from the United Kingdom or from any part of the United Kingdom; to amend the law relating to the jurisdiction of courts in Scotland as to tutory and curatory; to amend the law relating to the recognition of divorces, annulments and legal separations; to make further provision with respect to the effect of divorces and annulments on wills; to amend the law relating to the powers of courts to make declarations relating to the status of a person; to abolish the right to petition for jactitation of marriage; to repeal the Greek Marriages Act 1884; to make further provision with respect to family proceedings rules; to amend the Child Abduction Act 1984, the Child Abduction (Northern Ireland) Order 1985 and the Child Abduction and Custody Act 1985; and for connected purposes.
X1 The text of ss. 55, 58 to 63, 68, 69 was taken from S.I.F. Group 49:1 (Family Law: Marriage, England and Wales and Abroad), ss. 44 to 54, 64, 68, 69, Schs. 1, 2 from S.I.F. Group 49:3 (Family Law: Matrimonial Proceedings), ss. 56, 58 to 60, 63, 68, 69 from S.I.F. Group 49:7 (Family Law: Legitimacy, Affiliation and Age of Majority, England and Wales), ss. 1 to 7, 19 to 43, 65 to 69 from S.I.F. Group 49:9 (Family Law: Guardianship, England and Wales and Northern Ireland), ss. 1, 8 to 18, 25 to 43, 67 to 69 from S.I.F. Group 49:10 (Family Law: Guardianship and Aliment, Scotland), and ss. 57, 58 to 60, 63, 68, 69 from S.I.F. Group 49:11 (Family Law: Adoption).
C2 Pt. I applied by S.I. 1991/1723, art. 3(2), Sch. 2 and art. 3(3), Sch. 3.
F6 (ii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F6 (iii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F12 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F13 (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F14 (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) Provision may be made by act of sederunt prescribing, in relation to orders within subsection (1) (b) above, what constitutes an application for the purposes of this Part.
F5 Words in s. 1(1)(b) substituted (1.11.1996) by 1995 c. 36, s. 105(4), Sch. 4 para. 41(2)(a); S.I. 1996/2203, art. 3, Sch.
F7 Words in s. 1(1)(b)(iv) substituted (1.11.1996) by 1995 c. 36, s. 105(4), Sch. 4 para. 41(2)(b); S.I. 1996/2203, art. 3, Sch.
F267 F6 (ii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F268 F6 (iii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F275 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F276 (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F277 (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F266 Words in s. 1(1)(b) substituted (1.11.1996) by 1995 c. 36, s. 105(4), Sch. 4 para. 41(2)(a); S.I. 1996/2203, art. 3(3), Sch.
F269 Words in s. 1(1)(b)(iv) substituted (1.11.1996) by 1995 c. 36, s. 105(4), Sch. 4 para. 41(2)(b); S.I. 1996/2203, art. 3(3), Sch.
F270 Words in s. 1(1)(b)(ix) substituted (S.) (25.9.1991) by Age of Legal Capacity (Scotland) Act 1991 (c. 50, SIF 49:8), ss. 10(1), 11(2), Sch. 1 para. 44.
[F23 (2A) A court in England and Wales shall not have jurisdiction to make a special guardianship order under the Children Act 1989 unless the condition in section 3 of this Act is satisfied.
and, in either case, the jurisdiction of the court is not excluded by subsection (2) below.
(2) For the purposes of subsection (1) above, the jurisdiction of the court is excluded if, on the relevant date, [F39 matrimonial proceedings] [F40 or civil partnership proceedings] are continuing in a court in Scotland or Northern Ireland in respect of the marriage [F41 or civil partnership] of the parents of the child concerned.
and that order is in force.
F44 (4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) A court in England and Wales which has jurisdiction to make a [F46 Part I order] may refuse an application for the order in any case where the matter in question has already been determined in proceedings outside England and Wales.
the court may stay the proceedings on the application [F52 or (as the case may be) exercise its powers under Article 15 [F53 of the Council Regulation or Article 8 of the Hague Convention] ] .
(3) The court may remove a stay granted [F57 by virtue of subsection (2) (a) or (b) above] if it appears to the court that there has been unreasonable delay in the taking or prosecution of the other proceedings referred to in that subsection, or that those proceedings are stayed, sisted or concluded.
(4) Nothing in this section [F63 so far as it relates to proceedings not governed by the Council Regulation] shall affect any power exercisable apart from this section to refuse an application or to grant or remove a stay.
(1) [F64 Part I order] made by a court in Scotland or Northern Ireland (or a variation of such an order) comes into force with respect to a child at a time when a [F64 Part I order] made by a court in England and Wales has effect with respect to him, the latter order shall cease to have effect so far as it makes provision for any matter for which the same or different provision is made by (or by the variation of) the order made by the court in Scotland or Northern Ireland.
(2) Where by virtue of subsection (1) above a [F64 Part I order] has ceased to have effect so far as it makes provision for any matter, a court in England or Wales shall not have jurisdiction to vary that order so as to make provision for that matter.
[F65 (3) A court in England and Wales shall not have jurisdiction to vary a Part I order if, on the relevant date, matrimonial proceedings [F66 or civil partnership proceedings] are continuing in Scotland or Northern Ireland in respect of the marriage [F67 or civil partnership] of the parents of the child concerned.
(5) Subsection (3) above shall not apply in the case of a [F71 variation of a section 1(1) (d) order if the child concerned] is present in England and Wales on the relevant date and the court considers that the immediate exercise of its powers is necessary for his protection.
F75 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) Where this subsection applies, any family assistance order made under section 16 of the Children Act 1989 with respect to the child shall also cease to have effect.
A court in Scotland may entertain an application for a [F78 Part I order] otherwise than in matrimonial [F79 or civil partnership] proceedings only if it has jurisdiction under section 9, 10, 12 or 15(2) of this Act.

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Justia › US Law › Case Law › Federal Courts › District Courts › South Carolina › District of South Carolina › 1994 › United States v. Southern Contracting of Charleston, Inc.
SOUTHERN CONTRACTING OF CHARLESTON, INC. and Fireman's Fund Insurance Company, Defendants.
*108 Henry P. Wall, Jill R. Quattlebaum, Columbia, SC, for plaintiff.
B. Michael Brackett, Columbia, SC, for defendant.
This matter is before the court on Plaintiff's Motion for Summary Judgment.
On September 24, 1991, the Air Force awarded Defendant Southern Contracting of Charleston, Inc. (SoCon) a contract to replace an existing incinerator at the Charleston Air Force Base. SoCon contracted with Plaintiff Laura M. Conroy for the construction and installation of a new incinerator, which was known as "Burney" the Burner. Defendant Fireman's Fund Insurance Company served as a surety for SoCon on the project.
Taking the facts in the light most favorable to SoCon (the nonmoving party), Conroy caused delays in the incinerator project from the outset. For example, the intended completion date for the project was March 16, 1992; however, Conroy did not begin manufacture of Burney until May 18, 1992, two months beyond the original completion date. The subcontract required Conroy to design and submit blueprints that would comply with Air Force plans and specifications, but the Air Force rejected Conroy's submittals on three occasions.
As a consequence of these delays, SoCon was unable to complete its contract on time. The Air Force assessed liquidated damages against SoCon, and SoCon incurred substantial overhead expenses and consequential damages due to these delays.
Upon delivery of Burney on August 10, 1992, SoCon discovered several defects. The specifications called for the incinerator to be painted with heat resistant paint, but Burney was shipped to the site with only a coat of primer on it. Burney's refractory was defective. Upon attempting to assemble Burney, SoCon discovered the pieces would not fit together properly due to irregularities in the refractory between Burney's primary and secondary chambers. SoCon notified Plaintiff's representative at the site, Tyler Troupe, of this problem. With Conroy's consent, SoCon retained a technician to grind down the refractory so Burney could be assembled.
The subcontract required Conroy to provide a "field service technician" to be on site "in an advisory capacity to ensure proper operation of the system during testing.... Failure to have an incinerator manufacturer's field service technician on site during performance testing will void the performance guarantee." Specifications for Project BKFX91-1087. The parties' interpretation of the duties of the field service technician under this provision varied. The field service *109 technician himself testified that he was required to do nothing at the project site and was there mainly to pick up the check for the final payment owed to Conroy by SoCon.
SoCon encountered problems regarding Burney's electronic control box. The computer logic for the electronic control system for the computer was flawed, preventing Burney from operating properly in automatic mode. SoCon's president, an electrical engineer, substantially revised and edited the computer logic for Conroy's program to make the automatic mode function properly.
Due to these problems, SoCon, in lieu of sending final payment to Conroy, sent an invoice which listed SoCon's damages that flowed from Conroy's alleged breach of contract. These damages included the costs for extended overhead; liquidated damages assessed by the Government; and the cost of labor and materials incurred in making Burney operate properly in conformity with government specifications. The net result was a balance due to SoCon in excess of $65,000.
On September 22, 1993, Conroy filed suit against SoCon seeking payment of the balance of the subcontract price ($29,150.84). SoCon asserted as defenses that Conroy had materially breached the subcontract and failed to perform a condition precedent. SoCon also counterclaimed for breach of contract and breach of warranty.
Plaintiff now seeks summary judgment on its cause of action for payment of the contract price and on SoCon's causes of action for breach of contract and breach of warranty.
To grant a motion for summary judgment, this court must find "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In evaluating a motion for summary judgment, this court must view the record in the light most favorable to the nonmoving party. Perini Corp. v. Perini Constr., Inc., 915 F.2d 121, 123-23 (4th Cir. 1990). The judge is not to weigh the evidence himself but rather to determine if there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 2510-11, 91 L. Ed. 2d 202 (1986).
As a preliminary matter, this court must address the applicability of Article 2 of the UCC, as codified in Title 36 of the South Carolina Code, to this transaction. SoCon claims Article 2 is not applicable, because this transaction involves a mix of goods and services and the "services required of Plaintiff were far greater than incidental to Plaintiff's performance under the contract." Def.'s Mem.Opp'n Summ.J. at 11. Conroy contends that the transaction is primarily for the sale of a good.
This court agrees that this transportation involves a hybrid contract, calling for the delivery of goods and the provision of services. However, it may nevertheless be a "contract for the sale of goods" within the scope of § 36-2-201(1). In considering whether a hybrid contract is one "for the sale of goods" under the UCC, courts generally employ the "predominant thrust" or "predominant factor" test. See Ranger Constr. Co. v. Dixie Floor Co., 433 F. Supp. 442 (D.S.C.1977). Under this test, courts evaluate transactions to determine if "their predominant factor, their thrust, their purpose, reasonably stated, is the rendition of service, with goods incidentally involved (e.g., contract with artist for painting) or is a transaction of sale, with labor incidentally involved (e.g., installation of a water heater in a bathroom)." Bonebrake v. Cox, 499 F.2d 951, 960 (8th Cir.1974).
While it is true that Conroy was required to design blueprints, submit plans to the Air Force for approval, obtain Department of Health and Environmental Control approval, and perform various other steps before manufacturing and delivering the incinerator, these services were not the primary thrust of the contract. The primary purpose is evidenced in an August 5, 1991 proposal sent by Conroy to SoCon stating: "Please consider our quote to supply `Burney' the Burner Incinerator in compliance with data sheets titled `Construction Specifications': $93,325.00. *110 Plumbing and electrical lines and hook up are to be performed by others and not included in this quotation." (Emphasis added.) The contract itself is labeled a "Purchase Order," and the terms provide for the bulk of the contract price to be paid upon "delivery of equipment."
The Fourth Circuit applied Article 2 to a similar transaction in Kline Iron and Steel Co. v. Gray Communications Consultants, Inc., 715 F. Supp. 135 (4th Cir.1989). There, the contract was for the construction of a television tower. The court held that services such as engineering, design, fabrication and inspection, while crucial, should be characterized as part of the cost of the good. The court also said the language of the proposal, which used the term "Buyer," indicated a sale of a good.
SoCon attempts to distinguish this case from Kline by arguing that a government contract by its very nature involves more services than an ordinary contract. In support of this contention, SoCon presses the importance of the complex submittal and approval process in which a manufacturer must engage with various governmental agencies. SoCon contends that because failure to meet government specifications would prevent delivery of the good, the services must be considered an integral part of a government contract.
This court agrees that services, particularly in a government contract such as Conroy's, are an integral part of the manufacture and delivery of a good. Nevertheless, this court concludes that the predominant thrust of this contract is the provision of the incinerator, and therefore this contract is one for the sale of goods subject to the requirements of Article 2.
Plaintiff seeks summary judgment on its cause of action for payment of the contract price. All parties agree that SoCon accepted the incinerator, as acceptance is defined under S.C.Code Ann. § 36-2-606. Conroy argues that, because SoCon accepted the incinerator, it is obligated to pay Conroy at the contract rate. According to S.C.Code Ann. § 36-2-607(1), a "buyer must pay at the contract rate for any goods accepted." However, § 36-2-717 allows a buyer, upon notifying the seller of his intention to do so, to deduct all or any part of the damages resulting from any breach of the contract from any part of the price still due under the same contract. While the buyer must give notice of this intention to withhold payment, the notice need not be formal and any language which reasonably indicates the buyer's reason for holding up his payment is sufficient. S.C.Code Ann. § 36-2-717 off. cmt.
Here, in August of 1992, Conroy authorized SoCon to work on Burney's problems and deduct the cost of the work from the balance due on Burney upon start-up. (Facsimile from Conroy to SoCon of 8/11/92.) Further, instead of tendering the remainder of the contract price when it was due, SoCon sent an invoice listing SoCon's damages from Conroy's alleged breach of contract, including the extended overhead, liquidated damages, and labor and material costs incurred in making Burney operate properly. The net result was a balance due to SoCon in excess of $65,000.
The facsimile, the sending of the invoice, and the withholding of payment were sufficient to notify Conroy of SoCon's intention to deduct damages from the price due. Therefore, Plaintiff's Motion for Summary Judgment must be denied as to Plaintiff's cause of action.
Conroy also seeks summary judgment on SoCon's counterclaims. SoCon seeks damages for the losses it sustained as a result of Conroy's alleged breaches of contract and warranty. Whether SoCon is able to pursue these counterclaims depends on whether SoCon notified Conroy of any breach in accordance *111 with S.C.Code Ann. § 36-2-607(3) (a), which provides: "Where a tender has been accepted ... the buyer must within a reasonable time after he discover or should have discovered any breach notify the seller of breach or be barred from any remedy...." Unsurprisingly, SoCon claims it sufficiently notified Conroy, and Conroy claims she was not adequately notified.
SoCon claims it sufficiently notified Conroy because one of Conroy's employees was present in Charleston to witness the problems with Burney and SoCon's inability to use Burney prior to having the problems fixed. SoCon also notes that, during the delay in receiving the incinerator, it notified Conroy by letter that time was of the essence and that it faced liquidated damages.
Conroy claims she was not notified in accordance with § 36-2-607(3) (a), because she had no notice that SoCon considered her legally in breach and she thought her employees had resolved all of the problems.
Section 36-2-607(3) (a) does not prescribe any form for the required notification. Courts have thus developed their own guidelines for determining what constitutes adequate notice. Some courts have held that virtually any complaint about the transaction will satisfy the requirement. E.g. Northern States Power Co. v. ITT Meyer Indus., 777 F.2d 405 (8th Cir.1985); Boeing Airplane Co. v. O'Malley, 329 F.2d 585 (8th Cir.1964). Under this "lenient standard of notification," the buyer must merely let the seller know that the transaction is troublesome. Other courts require the buyer to notify the seller that the buyer considers the seller to be legally in breach. E.g. Eastern Air Lines v. McDonnell Douglas Corp., 532 F.2d 957 (5th Cir.1976). The standard adopted by these courts is known as the "strict standard of notification." SoCon and Conroy agree that South Carolina courts have not chosen between the lenient and strict notification standards, though the existence of both standards was recognized and explained in Southeastern Steel Company v. W.A. Hunt Constr. Co., 301 S.C. 140, 390 S.E.2d 475 (Ct.App.1990) (buyer gave inadequate notice of breach under either standard; therefore, court did not choose between standards).
The content of the notification need merely be sufficient to let the seller know that the transaction is still troublesome and must be watched. There is no reason to require that the notification which saves the buyer's rights under this section must include a clear statement of all the objections that will be relied on by the buyer, as under the section covering statements of defects upon rejection (Section 2-605). Nor is there reason for requiring the notification to be a claim for damages or of any threatened litigation or other resort to a remedy. The notification which saves the buyer's rights under this Article need only be such as informs the seller that the transaction is claimed to involve a breach, and thus opens the way for normal settlement through negotiation.
Although some courts have interpreted the last sentence of this comment to require that the notification specify a breach, this court interprets the comment as a whole to indicate exactly the opposite that virtually any notification that fairly apprises the seller of the problems will suffice. Indeed, some UCC commentators have said "the drafters intended a loose test; a scribbled note on a bit of toilet paper will do." James J. White and Robert S. Summers, Uniform Commercial Code 425 (2d ed. 1980).
As a policy matter, the lenient standard discourages the use of litigation to settle commercial disputes. Requiring a buyer to use the magic word "breach" does not encourage settlement with a seller who is attempting to cure defects. In fact, it does little more than force buyers to retain lawyers in an effort to preserve their rights and force sellers to hire lawyers as a defensive maneuver.
Additionally, the lenient standard promotes flexibility in commercial practice, which is one of the goals of the UCC. It is consistent with § 36-1-106, which provides that the "remedies provided by this act shall be liberally administered to the end that the *112 aggrieved party may be put in as good a position as if the other party had fully performed." The lenient standard also allows parties to conduct transactions with the pragmatic concept of "commercial good faith" as their guide. Whether a buyer acted with commercial good faith should be the focus of the case by case analysis required to assess adequacy of notification. See Northern States Power Co. v. ITT Meyer Indus., 777 F.2d 405, 409 (8th Cir.1985); see also LaFayette Stabilizer Repair, Inc. v. Machinery Wholesale Corp., 750 F.2d 1290, 1294 (5th Cir.1985) (determination of whether notice complies with the legal requirement depends on the reasonableness of the buyer's efforts to communicate dissatisfaction); Kopper Glo Fuel, Inc. v. Island Lake Coal Co., 436 F. Supp. 91, 96 (E.D.Tenn.1977) (notice analysis must be conducted with attention overall to questions of commercial good faith).
the buyer purchased a helicopter which was delivered on December 1, 1959. The seller did not receive formal notice of dissatisfaction until February, 1961. The court held that certain events well prior to February, 1961 were sufficient to constitute notice to the seller. The first of these was the failure of the helicopter to function properly in the presence of one of the seller's experts. After the demonstration, but before February, 1961, the buyer had informed the seller that the buyer was closing down operations because of inadequacies in the helicopter and was moving the helicopter elsewhere in order to take care of it.
White & Summers, Uniform Commercial Code 426. Another case illustrating the lenient standard is Oregon Lumber Co. v. Dwyer Overseas Timber Prods. Co., 280 Or. 437, 571 P.2d 884 (1977). There, the buyer bought timber of a particular grade from the seller. On several occasions, the buyer informed the seller that the lumber was below grade. However, the buyer continued to accept the timber and made several payments before refusing to pay the balance due under the contract. The court ruled that the early complaints of the buyer met the notification requirement of § 2-607(3) (a). The court held that notification "may be given in any manner or form sufficient to appraise the seller that there are problems with the transaction." 571 P.2d at 887. The court further held that when a buyer notifies a seller of a problem with a transaction, the buyer need not assert the "intention to make a claim for damages or pursue any other remedy." Id.; see also Southern Illinois Stone Co. v. Universal Engineering Corp., 592 F.2d 446, 452 (8th Cir.1979) (parties working together for several months provided the kind of notice which opens the way for normal settlement through negotiation and therefore satisfied § 2-607(3)).
In light of the aforementioned policies and cases, it seems clear that any good faith communication that reasonably notifies the seller that the buyer is troubled by the transaction should suffice to preserve the buyer's right to pursue UCC remedies in the event it suffers damages from the defect.
The seller here actually knew of the defects and the problems those defects were causing the buyer, as in Boeing and Oregon Lumber. SoCon notified Conroy early in the transaction that the delays were troublesome and that the incinerator was not functioning properly.
Where more than one inference may be drawn from undisputed facts, or where the facts are disputed, the sufficiency of notice of a breach of contract or warranty is a question properly submitted to the jury. Northern States Power Co. v. ITT Meyer Indus., 777 F.2d 405 (8th Cir.1985). Applying the lenient standard to the facts of this case, and viewing the facts in the light most favorable to SoCon, this court cannot say as a matter of law that SoCon did not sufficiently notify Conroy under § 36-2-607(3) (a). Therefore, Conroy's Motion for Summary Judgment on SoCon's counterclaims must be denied.
*113 ORDERED that Plaintiff's Motion for Summary Judgment be DENIED.
 In a letter to the court, Plaintiff objects to the use of this facsimile, which Defendant submitted after oral argument on the motion. Apparently, Defendant inadvertently omitted this document from its Memorandum in Opposition to Plaintiff's Motion for Summary Judgment. Because this court should decide dispositive motions based on a consideration of the facts as they truly are, the Plaintiff's objection to Defendant's submission of this facsimile is overruled.


This letter responds to your request, pursuant to the Department of Justice's Business Review Procedure, 28 C.F.R. § 50.6, for a statement of the Department's enforcement intentions regarding a proposed merger of CVT Surgical Center ("CVT") and Vascular Surgery Associates of Baton Rouge ("VSA"). CVT employs six cardiovascular-thoracic surgeons. VSA employs three surgeons and contracts with a fourth, all of whom perform only peripheral vascular surgery. Based on the information provided and our own investigation, it does not appear that the merger of these two practices will create or enhance anticompetitive market power in the putative service and geographic markets in the greater Baton Rouge area. Therefore, the Department has no present intention to challenge the merger.
As we understand from the information you have provided, CVT and VSA are both Louisiana Professional Medical Corporations located in Baton Rouge, Louisiana. The six CVT surgeons operate at the three principal surgical hospitals in Baton Rouge as well as at North Oaks Medical Center in Hammond, Louisiana, which is approximately a one hour drive from Baton Rouge. VSA's surgeons operate in the Baton Rouge hospitals and have consulting privileges in other Baton Rouge health care facilities as well as at facilities in Gonzales, Zachary, Plaquemine and Denham Springs, Louisiana.
The Department and the courts examine the lawfulness under the antitrust laws of a merger of physician practices using the same antitrust standards that they apply to any other merger or combination of competing entities. The Clayton Act requires the delineation of the proper "line of commerce" and "area of the country" (i.e., relevant product and geographic markets) and then the evaluation of the likely economic effect of the merger in that market (or markets). The merger is unlawful if it may tend substantially to lessen competition in any relevant market by creating, enhancing or facilitating the exercise of market power. See Department of Justice/Federal Trade Commission Horizontal Merger Guidelines, 4 Trade Reg. Rep. (CCH) ¶ 13,104 (April 2, 1992), § 2 ("Merger Guidelines"). "Market power" is generally defined as "the power to control prices [or restrict output] or exclude competition." United States v. E. I. du Pont de Nemours & Co., 351 U.S. 377, 391 (1956).
In defining the relevant product (or service) market for a particular merger, the Department determines what substitutes, as a practical matter, are reasonably available to consumers of each product of the merging firms if the price of the product were raised by a small but significant amount. See Merger Guidelines at §1.11. Services provided by a particular physician specialty may often be a relevant service market. See Statements of Antitrust Enforcement Policy in Health Care, Issued by the U.S. Department of Justice and the Federal Trade Commission, August 1996, at 76 ("Statements"). In this case, of the hundreds of types of surgical procedures within CVT's and VSA's recognized specialties, only approximately 60 procedures are performed in common by the two groups. During 1995, these "overlap" procedures accounted for approximately 12.5% of CVT revenue from surgical procedures and approximately 15% of the procedures performed by CVT. Thus, you contend, and we agree, that the relevant service market for analyzing this merger are those 60-odd "overlap" procedures.
Next, we determine the relevant geographic market by identifying where physicians who perform these procedures could practice in order to be good substitutes for any of the merging physicians if the prices for their services rose by a small but significant amount. The participants in the market would comprise all surgeons who either currently do perform the overlap procedures orwould likely begin providing them in the relevant geographic market within a year and without incurring significant sunk costs. See Merger Guidelines at §1.3.
You have suggested that the geographic market relevant to this merger may be at least as large as the area within a one and one-half hour drive of Baton Rouge, including the cities of Hammond, New Orleans, Houma, Lafayette and Thibodaux. Your submission indicates that you believe the market to be at least that large, based on (among others) the facts that CVT has found it competitively necessary and economically justifiable to maintain continuous coverage of Hammond, approximately a one hour drive from Baton Rouge, and that the large New Orleans-based Ochsner Clinic has established a Baton Rouge office employing at least one vascular specialist, one cardiothoracic surgeon and three general surgeons. Further, Ochsner Clinic cardiovascular surgeons have provided services in Baton Rouge in response to short-term staffing demands of Ochsner's Baton Rouge office. Thus, you contend, the Ochsner Clinic faces no barriers to providing rapid supply in response to any attempted price increase in the putative geographic market for the overlap procedures. Major payers agree that they would have adequate substitutes to turn to should the merged entity raise prices unreasonably, including physicians from the Ochsner Clinic.
It has been our experience that, in general, and especially in urban and semi-urban areas, health care geographic markets are localized. Although this is somewhat less the case for health care specialist markets than it is for primary care markets, it is prudent to consider the effects of this merger under a range of assumptions about the relevant market size.
The large geographic market that you have suggested would be appropriate if payers could and would defeat a small hypothetical price increase in Baton Rouge by sending patients to New Orleans and the other towns you have identified. In this market, 82 surgeons claim vascular surgery as a specialty in Yellow Pages advertising. This would result in the merged entity representing significantly less than 20 percent of the total number of surgeons available to perform the relevant procedures, making it highly likely that market competition would prevent the merged entity from raising prices anticompetitively.
It is possible, however, that the relevant geographic market is no larger than Baton Rouge. From information you have provided, it appears that the merging groups will account for approximately 50 percent of the vascular surgeons who advertize in the Baton Rouge Yellow Pages. There are, however, several attributes of this market that would mitigate any competitive concern we might otherwise have about this merger. First, this percentage may not fully include competing physicians, such as those in New Orleans' Ochsner Clinic, that already practice in Baton Rouge or would begin to practice there in response to a small but significant price increase. Neither does it include cardiologists and other specialists that you contend are available to perform many of the overlap procedures. Second, there is some evidence that payers may need to include very few peripheral vascular surgeons (perhaps only one) in a managed care network, so the independent vascular surgeons in Baton Rouge that are not part of the merging group offer payers sufficient contracting alternatives to prevent the merged group from exercising market power. Third, given that payers require few vascular specialists on a panel, it appears that sponsored entry or expansion by an incumbent group would likely defeat an attempt by current providers to raise price. Lastly, our investigation has confirmed that payers in Baton Rouge are generally confident that the merged group is not likely to acquire market power.
Given these considerations, we conclude that, in any reasonably defined geographic market, the merged entity should face effective competitive constraints on its ability to exercise market power in the provision of peripheral vascular procedures, and thus that the merger would not be likely to lessen competition substantially.
Since the proposed merger does not raise concern about any significant potential adverse competitive effects based on an analysis of market characteristics, we do not need to scrutinize any other factors, such as any efficiencies that are likely to result from the merger. We nevertheless note that CVT and VSA anticipate that their merger will produce significant efficiencies and benefits for consumers and payers in the market area. For example, they believe the larger patient base will result in improved patient care by allowing further specialization with volume sufficient to maintain high standards of proficiency in individual procedures. You also state that the larger volume should also support the addition of state-of-the-art equipment and technology that neither firm could support alone, such as the acquisition of costly color duplex ultrasound vascular testing equipment. You contend that the merger will allow consolidation of thousands of dollars in duplicative and underutilized diagnostic and testing equipment currently owned by each firm, as well as savings on administrative costs. Finally, you state that the larger patient base will support formalized utilization review and case management procedures and may allow the merged entity to take on risk-based contracts for large managed-care populations.
It appears from the foregoing analysis that the proposed merger is not likely to have any significant adverse competitive effects and may, in fact, result in substantial efficiencies for the benefit of consumers and payers. Therefore, the Department has no present intention of challenging the proposed merger because it is not likely substantially to lessen competition. In accordance with our normal practice, however, the Department remains free to bring an enforcement action in the future should the operation of the merged group prove anticompetitive in purpose or effect.
This statement is made in accordance with the Department's Business Review Procedure, 28 C.F.R. § 50.6, a copy of which is enclosed. Pursuant to its terms, your business review request and this letter will be made available to the public immediately. In addition, any supporting documents that you do not identify to be confidential business information under Paragraph 10(c) of the Business Review Procedure within 30 days of the date of this letter will also be made publicly available.


This Memorandum of Understanding (MOU) between the Food and Drug Administration/Center for Biologics Evaluation and Research (FDA/CBER) and the National Institutes of Health/ National Heart, Lung, and Blood Institute (NIH/NHLBI), each a party and collectively the parties, provides a framework for coordination and collaborative efforts between these two entities, which are both components of the Department of Health and Human Services. This MOU also provides the principles and procedures by which information sharing between FDA/CBER and NIH/NHLBI units shall take place.
FDA is a science-based regulatory agency authorized to enforce the Federal Food, Drug, and Cosmetic Act (the Act) as amended (21 U.S.C. § 301, et seq.). In fulfilling its responsibilities under the Act, FDA, among other things, directs its activities toward promoting and protecting the public health by assuring the safety, efficacy, and security of drugs, veterinary products, medical devices and radiological products and the safety and security of foods, dietary supplements, and cosmetics. FDA also has responsibility for regulating the manufacturing, marketing and distribution of tobacco products to protect the public health and to reduce tobacco use by minors. To accomplish its mission, FDA must stay abreast of the latest developments in. research and communicate with stakeholders about complex scientific and public health issues. Within FDA, CBER's mission is to protect and enhance the public health through regulation of biological, device and combination products according to statutory authorities. The regulation of these products is founded on science and law to ensure their purity, potency, safety, and efficacy.
NIH is the Federal focal point for biomedical research in the United States. The NIH mission is to uncover new knowledge that will lead to better health for everyone.
NIH works toward that mission by conducting research in its own laboratories; supporting the research of non-Federal scientists in universities, medical schools, hospitals and research institutions throughout the country and abroad; helping in the training of research investigators; and fostering communication of medical information. The NHLBI, a component of the NIH, is the nation’s leading supporter of biomedical research on disorders of the heart, lung, and blood systems. The mission of the NHLBI is to reduce the burden of disease in these areas. To achieve its mission of reducing the public health burden associated with heart, lung, and blood diseases, the NHLBI conducts, fosters, coordinates, and guides research on the causes, prevention, diagnosis, and treatment of heart, vascular, lung, blood, and sleep disorders, including basic research in related scientific areas. NIH's and FDA's respective missions to protect the public health are complementary and may overlap depending upon the subject matter. The agencies work collaboratively to protect and improve public health. Sometimes FDA/CBER or NIH/NHLBI may have information that could be useful to the other party in that party's performance of its responsibilities. Timely sharing of information between NIH/NHLBI and FDA/CBER is therefore critical to protect and improve the public health.
1. FDA/CBER and NIH/NHLBI will coordinate and collaborate with each other to protect and improve the public health. To achieve this, each Party will capitalize on the expertise, resources, and relationships of the other in order to increase its own capability and readiness to respond to situations. In addition, each Party will designate central contact points  to coordinate communications from the other, dealing with matters covered by this agreement.
4. Parties will present reciprocal in-house presentations to their corresponding staff on topics of common interest such as FDA's managed regulatory review process and NIH/NHLBI's extramural, federally-funded translational research initiatives and programs, specifically those applicable to development of biologic therapies for the treatment of heart, vascular, lung, blood, and sleep diseases, conditions and disorders.
5. Where appropriate, FDA/CBER will provide relevant reference documents that describe the investigational product review process and marketing approval processes for use by NIH/NHLBI staff involved in conferring with prospective translational research grantees to assist in the design and implementation of clinical studies that comply with FDA/CBER guidance and regulations.
6. FDA/CBER and NIH/NHLBI MOU parties will seek opportunities to work collaboratively together in order to improve efficiency of the submission and review process for clinical investigator applications requesting funding from NIH/NHLBI and require submission of an Investigational New Drug (IND) application to FDA/CBER.
7. Under this MOU, parties will promote communication and consultation on select policy issues and guidance documents of particular interest and relevance to researchers, consumers and/or health care professionals pertaining to novel cellular or gene transfer therapies. This cooperative interaction will target possible health risk posed to the public as well as address research and regulatory processes affecting the pace of bench top to bedside research translation. As an example, during drafting of policy documents such as FDA Guidance for Industry or NIH Points-to-Consider that apply to cellular/tissue-based or gene transfer therapies, each Party is encouraged to seek input from its counterpart in order that appropriate modifications to draft documents may be made prior to initiation of a formal clearance process.
8. NIH/NHLBI will invite FDA/CBER input and recommendations during development of Funding Opportunity Announcements targeting relevant, essential research areas in order to foster and support development of biologic tissue, cellular, and gene transfer products for treating heart, vascular, lung, blood, and sleep diseases, conditions and disorders.
9. As appropriate, FDA/CBER will invite participation of NIH/NHLBI experts in pre decisional evaluation of selected INDs that seek FDA/CBER permission to initiate clinical studies involving novel cellular/tissue and gene transfer products whose scientific and clinical aspects may be complex and non-conventional.
10. This MOU will provide opportunity for FDA/CBER staff to participate in NIH/NHLBI-sponsored conferences that pertain to development of cellular and gene transfer products. FDA/CBER contributions may include: (1) participation in workshops, (2) individual presentations, (3) use of existing videotaped FDA conferences/workshops on selected regulatory policy and process issues.
11. This MOU does not preclude NIH/NHLBI or FDA/CBER from entering into other agreements that may enable special programs to be handled more efficiently and expertly.
FDA/CBER and NIH/NHLBI agree that the following principles and procedures will govern the sharing of non-public information, as resources permit, between the two parties.
Although there is no legal requirement that FDA/CBER and NIH/NHLBI exchange information in all areas, the parties agree that there should be a presumption in favor of full and free sharing of information between FDA/CBER and NIH/NHLBI. As public health agencies within the Department of Health and Human Services, there are no legal prohibitions that preclude FDA or the NIH from sharing with each other most information in the possession of either agency. Both parties recognize and acknowledge, however, that it is essential that any non-public information that is shared between FDA/CBER and NIH/NHLBI whether written or oral must be protected from any disclosure that is not authorized by law or regulation. See e.g., 21 U.S.C. § 331(j), 18 U.S.C. § 1905, 21 CFR Parts 20 and 21, 45 CFR Parts 5 and 5b, and 42 U.S.C. § 241(d). Safeguards are needed to protect non-public information shared, both written and oral, such as trade secrets and confidential commercial information; identities of study participants and other personal privacy information; privileged and/or pre-decisional agency information; research proposals, progress reports, and/or unpublished data; or national security information. Such safeguards also help ensure FDA/CBER's and NIH/NHLBI's compliance with applicable laws and regulations.
1. The requesting party must specify, in writing  the information requested (to facilitate identification of relevant information), provide a brief statement of why the information is needed, and include the following requesting party template language: “This request is made pursuant to the Memorandum of Understanding for Sharing of Non-Public Information between FDA/CBER and NIH/NHLBI, dated August 1, 2014. [Requesting party] agrees not to disclose any non-public information shared between FDA/CBER and NIH/NHLBI whether orally or in writing, in any manner.” This request shall state which internal unit offices and/or individuals are requesting the information.
2. The party receiving the request (sharing party) will determine, based upon the request described in section III.B.l above, whether it is appropriate and practicable to share the requested non-public information.
a. The requesting party will limit the dissemination of shared non-public information it receives to internal unit offices and/or employees that have been identified in its written request and/or have a need to know. he unit official who signs the request letter· shall be responsible for ensuring information is not distributed to inappropriate recipients.
Liaison Officers will participate in the management, coordination and oversight of this agreement. The Liaison Officers will constitute a Steering Committee comprised of an equal number of member representatives from the FDA/CBER and the NIH/NHLBI. Two Liaison Officers, one designate from each participating agency, will serve as co-chairs of the Committee.
All other terms, conditions, and content of the MOU Number 225-07-1000, executed on September 11, 2008, remain unchanged, including that there are no fund transfers between these two groups.
This is an amendment to the Memorandum of Understanding (MOU) Number 225-07-1000 dated September 11, 2008 (the last modification was executed on July 23, 2014) to change by mutual agreement the liaisons for the Food and Drug Administration Liaisons and the National Heart, Lung, and Blood Institute and to change the termination date from September 10, 2018 to September 9, 2023.
This agreement became effective on September 11, 2008, and shall continue in effect until September 10, 2018, as modified herein and pursuant to the attached summary of all modifications or terminated by either party upon a ninety (90) day advance written notice to the other party.
These changes are permissible under article V. (Liaison Officers) and article VI. Period of Agreement for this MOU.
FDA/CBER agrees that it will not disclose any information that NIH/NHLBI shares with it and designates non-public without prior written permission from NIH/NHLBI and that FDA/CBER will comply with the principles and procedures set forth in the Memorandum of Understanding on information sharing between FDA/CBER and NIH/NHLBI dated [Insert date MOU between FDA/CBER and NIH/NHLBI initiated]. FDA/CBER acknowledges that applicable laws and regulations may govern the disclosure of such information. See e.g., 21 U.S.C. § 331(j), 18 U.S.C. § 1905, 21 CFR Parts 20 and 21, 45 CFR Parts 5 and 5b, and 42 U.S.C. § 241(d).
FDA/CBER will limit dissemination of any shared information to the following FDA/CBER offices and/or employees, unless it identifies additional FDA/CBER employees who have a need to know the non-public information: [Identify office(s) and/or employee(s)].
NIH/NHLBI agrees that it will not disclose any information that FDA/CBER shares with it and designates nonpublic without prior written permission from FDA/CBER and that NIH/NHLBI will comply with the principles and procedures set forth in the Memorandum of Understanding on information sharing between NIH/NHLBI and FDA/CBER dated __________ NIH/NHLBI acknowledges that applicable laws and regulations may govern the disclosure of such information. See e.g., 21 U.S.C. § 331(j), 18 U.S.C. § 1905, 21 CFR Parts 20 and 21, 45 CFR Parts 5 and 5b, and 42 U.S.C. § 241(d).
NIH/NHLBI will limit dissemination of any shared information to the following NIH/NHLBI offices and/or employees, unless it identifies additional NIH/NHLBI employees who have a need to know the non-public information: [Identify office(s) and/or employee(s)].
FDA/CBER shall notify the contact person or designee of NIH/NHLBI if there are any attempts to obtain such shared non-public information by compulsory process, including, but not limited to, Freedom of Information Act requests, subpoenas, discovery requests, and litigation complaints or motions.
FDA/CBER shall notify NIH/NHLBI before complying with any judicial order that compels the release of such shared non-public information so that FDA/CBER and/or NIH/NHLBI may take appropriate measures, including filing a motion with the court or an appeal.
By a signed request letter dated __________ FDA/CBER has agreed not to disclose the above- described shared non-public information without prior written permission of NIH/NHLBI. FDA/CBER has acknowledged that applicable laws and regulations may govern the disclosure of such information. See e.g., 21 U.S.C. § 331(j), 18 U.S.C. § 1905, 21 CFR Parts 20 and 21, 45 CFR Parts 5 and 5b, and 42 U.S.C. § 241(d).
FDA/CBER has also agreed to comply with the principles and procedures set forth in the Memorandum of Understanding on information sharing between FDA/CBER and NIH/NHLBI, dated __________.
NIH/NHLBI shall notify the contact person or designee of FDA/CBER if there are any attempts to obtain such shared non-public information by compulsory process, including, but not limited to, Freedom of Information Act requests, subpoenas, discovery requests, and litigation complaints or motions.
NIH/NHLBI shall notify FDA/CBER before complying with any judicial order that compels the release of such shared non-public information, so that FDA/CBER and/or NIH/NHLBI may take appropriate measures, including filing a motion with the court or an appeal.
By a signed request letter dated __________, NIH/NHLBI has agreed not to disclose the above-described shared non-public information without prior written permission of FDA/CBER. NIH/NHLBI has acknowledged that applicable laws and regulations may govern the disclosure of such information. See e.g., 21 U.S.C. § 331(j), 18 U.S.C. § 1905, 21 CFR Parts 20 and 21, 45 CFR Parts 5 and 5b, and 42 U.S.C. § 241(d). NIH/NHLBI has also agreed to comply with the principles and procedures set forth in the Memorandum of Understanding on information between FDA/CBER and NIH/NHLBI, dated __________.
 See section V. of this MOU.
 Each party has implemented or will implement the agency’s data and information security statutory, regulatory, policy, or procedural requirements and has implemented or will implement, to the extent necessary and practicable, all data and information security recommendations suggested by the other agency.
 The term “writing” used throughout this MOU includes a writing by electronic means.


text:
Appeal heard on July 26 and 27, 2006, at Toronto, Ontario.
tax for the purposes of the GST provisions of the ETA. The Minister should also in reassessing take into account any other adjustments to which he may have agreed at the objection level.
Signed at Ottawa, Canada, this 30th day of November 2006.
 This appeal is from an assessment made under the Excise Tax Act (“ETA”). The issue is whether the appellant, United Parcel Service Canada Ltd. (“UPS”) is entitled to an allowance for an unclaimed rebate pursuant to subsection 296(2.1) of the ETA. That at least is how the appellant stated the issue. I think the question might be more accurately stated as whether the appellant is entitled to a rebate at all in the circumstances of this case.
 The parties entered into a statement of agreed facts (“SAF”) and it is attached as Schedule A to these reasons. The essential facts can be stated fairly briefly. UPS carries on business as a courier and in this business it brings shipments into Canada from foreign locations for delivery to consignees at addresses in Canada.
 Such shipments may attract Canadian customs duties and Goods and Services Tax (“GST”). UPS is also a licensed customs broker. When goods are brought into Canada GST has to be paid as well as customs duties and these taxes are paid by UPS. One question that may be relevant is whether UPS pays the taxes as agent for and on behalf of the consignee and, if so, what effect it has on the disposition of this case.
 At all events, overpayments of GST were sometimes made by mistake by UPS. I assume mistakes were made in the amount of customs duties paid but that is not what we are concerned with in this appeal.
 The overpayments fall into eleven broad categories as set out in paragraph 19 of the SAF.
 In the result, in the 1996/1997 periods the amount of GST overpaid by UPS for the shipments that it brought into Canada was $2,937,123. This amount was claimed as a rebate by UPS, i.e. it was shown as a reduction of its own GST liability on line 105 of the return.
 On assessment, the Minister of National Revenue disallowed the rebate claim of $2,937,123 and also assessed interest of $456,606.20 and a penalty of $632,229.77.
 The above is a somewhat simplified version of the relevant facts. A few other points should be noted. As will be apparent from the SAF, UPS did not seek reimbursement of the overpayment from its customers or from the consignees. The overpayment was made from UPS’ own funds and it was UPS that was out of pocket.
Some changes are needed to address the way in which GST adjustments are handled when GST is paid on the Canadian Value of goods imported. The current procedure is very ambiguous. This causes extensive delays in recovering our GST from the government, paid on our customers behalf.
When a customer is given a credit for a billing adjustment, the amount of the adjustment includes an amount for GST. Since we are crediting the GST amount back to the customer we should also be recognizing this GST refund as a reduction of our GST liability to the government, for all adjustments. That is, at the end of the month a GST payment is submitted to Revenue Canada for all services sold. The amount of the GST adjustment will reduce the payment to Revenue Canada.
A) Customer without GST registration number: the customer account is credited and the GST adjustment is debited to the GL account # 203470 Good and Service Tax which results in a reduction in our GST liability to the government.
B) Customer with a GST registration number: the customer account is being credited and a GST adjustment is debited to the GL account # 113511 – Account Receivable-Others Custom Duty and Tax Refund. An Application must be processed for the rebate of goods and services tax on behalf of our customer. To do this, we must obtain specific documentation from our customers, Canada Customs, and Fredericton Brokerage. This process may take several weeks. The time elapsed between the process of the rebate application and the time we receive the refund back from the government varies from 60 days to one year. Upon receipt of the Government cheque, for the GST, the GL account # 113511 is credited.
The new proposal would utilize procedure A only. Procedure A will allow all the GST adjustments to be coded to the GL account # 203470, regardless if customer is GST registered or is not GST registered. However, a credit note must be issued to GST registered customers. (See sample attached). For audit purposes, copy of the credit note will be kept on file with all relative documentation.
This procedure has been reviewed with Mrs. Edith D’Amour from Revenue Quebec which administrates GST on behalf of Revenue Canada for Quebec customers and with Mr. Stephane Ferland from Revenue Canada, Summerside Tax Centre PEI.
Who is responsible for the verification and approval for GST issues on combined (Customs issue/GST issue) claims submitted on Form B2s through Customs?
The procedure will be different for registered and for non-registered claimants.
Non-Registrants who have overpaid amounts as duties and GST on imported goods may recover the overpayment by filing a CANADA CUSTOMS ADJUSTMENT REQUEST (FORM B2). Customs will refund the duty portion of the claim and will advise Excise/GST to send the non-registrant a rebate of the GST portion of the claim. After Customs has processed the duty portion of the claim, the non-registrant should contact the nearest Revenue Canada Excise/GST District office with enquiries about the GST rebate.
When the overpayment involves only GST, the amount may be recovered by filing a GENERAL REBATE APPLICATION FOR REBATE OF THE GOODS AND SERVICES TAX (FORM GST 189E), if no Customs issue is involved. This form, which may be filed once a month, is available from Revenue Canada Excise/GST District offices. However, if the rebate claim involves a Customs issue (eg. a re-determination of tariff classification or re‑appraisal of the value for duty of the goods), Form B2 must be filed with Customs, who will advise Excise/GST to rebate the amount if entitled.
Registrants who have overpaid amounts as duties and/or GST should file a Form B2 to recover the overpayment of Customs duties and file a GST 189E to recover the GST overpayment on imported goods, unless an Input Tax Credit has already been claimed for that amount. If the rebate claim involves a Customs issue, the GST 189E should not be filed until after the issue has been resolved. The Customs decision should be referred to in order to support the GST rebate claim.
If an ITC has been claimed to recover the excess amount paid on account of GST, it is not Excise/GST administrative policy to require the registrant to adjust the ITC and claim a rebate. No further action is required. The Excise Tax Act provides the authority at the time of an audit to set off an unclaimed rebate against an unentitled ITC taken. Consequently, an ITC may be taken for an amount overpaid on account of GST on an imported good instead of filing a rebate claim. There will be no tax, penalty or interest implications, provided an ITC is not claimed where a rebate is paid for the same amount.
As a GST registrant we will not claim a credit (input tax credit) for the same transaction.
Note to the Importer: Upon reception of this authorization, United Parcel Service will credit your account # for the above mentioned amount.
 I am inclined to question how legally effective this document is. A person entitled to an input tax credit (“ITC”) cannot assign its right to someone else. Under the Financial Administration Act Crown debts are not assignable in the absence of statutory authority.
There is no evidence that this version was ever used. It might have been somewhat more effective.
do hereby constitute and appoint United Parcel Service Canada Ltd (hereinafter referred to as “our attorney”) of 900 Hanwell Road, Fredericton, New Brunswick E3B 6A2 our true and lawful attorney to transact business under the Customs Act on our behalf in all matters relating to the accounting for and payment of duties in respect of imported goods released under that Act, at all Customs offices in Canada.
I/We acknowledge that any duties, charges or other amounts paid on our behalf or to our account by our attorney or sub-agent shall be a debt due by us to our attorney or sub-agent and any refund, rebate or remission of such duties, charges or other amounts shall be the property of our attorney or sub-agent. We direct and authorize any government agencies collecting same to deliver such rebate, refund or remission to our attorney or sub-agent.
I/We grant our attorney full power and authority to appoint any other person to whom a licence to transact business as a Customs Broker has been issued under the Customs Act as a sub-agent to transact the aforesaid business on our behalf at any of the aforementioned Customs offices, and to revoke any such appointment and to appoint any other person who holds such licence as a sub-agent in the place of any sub-agent whose appointment has been revoked, as our attorney shall, from time to time, think fit.
I/We agree to, on demand, reimburse our attorney for all moneys properly expended by such attorney, and/or by any sub-agent appointed by our attorney on our behalf, including the payment of any duty and/or taxes, or posting of any surety bond deposited as security with any Customs office.
This Power of Attorney shall be and remain in full force and effect until due notice of its revocation shall be given to our aforesaid attorney, in writing.
“This causes extensive delays in recovering our GST from the government, paid on our customers behalf”.
 This sentence neatly illustrates the problem. He refers to “our” GST, and describes it as “paid on our customers behalf”.
Imposition of goods and services tax ― Subject to this Part, every person who is liable under the Customs Act to pay duty on imported goods, or who would be so liable if the goods were subject to duty, shall pay to Her Majesty in right of Canada tax on the goods calculated at the rate of 7% on the value of the goods.
(b) the amount of all duties and taxes, if any, payable thereon under the Customs Tariff, the Special Import Measures Act, this Act (other than this Part) or any other law relating to customs.
tax, net tax, penalty, interest or other obligation under this Part in circumstances where the amount was not payable or remittable by the person, whether the amount was paid by mistake or otherwise, the Minister shall, subject to subsections (2) and (3), pay a rebate of that amount to the person.
(c) a rebate of the amount is payable under subsection 215.1(1) or (2) or 216(6) or a refund of the amount is payable under section 69, 73, 74 or 76 of the Customs Act because of subsection 215.1(3) or 216(7).
(3) Application for rebate — A rebate in respect of an amount shall not be paid under subsection (1) to a person unless the person files an application for the rebate within two years after the day the amount was paid or remitted by the person.
the Minister shall, unless otherwise requested by the person, apply all or part of the allowable rebate against that net tax or overdue amount as if the person had, on the particular day, paid or remitted the amount so applied on account of that net tax or overdue amount.
 The question boils down essentially to this: UPS overpaid GST on behalf of its customers. It did not recover from them the amount that it overpaid. It now seeks to recover that amount from the Government of Canada. Its entitlement to the amount as a matter of fairness is unquestioned and there are various ways it might have used to get the money back. It might have sued in the Federal Court. Whether it would have succeeded is a matter on which I shall not speculate. If, as I conclude below, the remedy is found in the ETA itself, the matter is within the Tax Court’s jurisdiction. It might have charged its customers for the overpayment and applied on their behalf to get it back from the government. When it recovered the overpayment it could have credited it against the customers liability to it. This is obviously cumbersome, time consuming and involves charging customers for mistakes made by UPS. It might in computing its income have deducted the overpayments that it was otherwise unable to recover on the basis that they were an ordinary costs of doing business. I should think there would have been a strong case for doing so. However, deducting an expense is only about one half as good as recovering it fully.
 In the result UPS did none of these things. It short‑circuited the process. The question is whether the legal correctness of this approach is equal to its common sense practicality.
UPS asserts that even if it remitted overpayments as agent for its customers, at common law an agent may sue to recover amounts paid by the agent due to a mistake. As noted above, the provisions of subsections 58(5) and (6) of the Customs Act foreclose this argument with respect to a majority of the categories of “errors” committed by UPS as the section deems the declaration UPS made to Revenue Canada at the time of importation to be the “correct” tariff classification and value for duty. The Customs Act contains a complete statutory code which forecloses any common law relief. As UPS did not request a re‑determination or re‑appraisal in the manner set out in section 60 of the Customs Act, there is no amounts paid due to a mistake.
 Whether there was an overpayment or the amount thereof is not before me. The fact of the overpayment and the amount thereof are admitted.
 The Crown’s position when one cuts through the technicalities is simply this: UPS was the agent for its customers. It paid GST on their behalf. If it paid too much, it did so as agent for the customers and only they are entitled to recover it or to treat the overpayment as giving rise to ITCs which could be set off against their GST liability to arrive at their net tax.
 In interpreting any legislation, including the GST provisions of the ETA as well as the Customs Act, it is important to follow an approach that, where possible, achieves a sensible, practical and common sense result (Maritime Life Assurance Co. v. The Queen,  G.S.T.C. 1 (T.C.C.), aff’d  G.S.T.C. 89 (F.C.A.)) and one that is consonant with the scheme of the Act (Highway Sawmills Ltd. v. M.N.R., 66 DTC 5116, per Cartwright J.).
 I do not see how allowing the person who has paid the GST − and who, I emphasize, has an obligation to pay it − to avail itself of the mechanism in the ETA for recovering overpayments can be inconsistent with the scheme of the Act.
Subject to this section, all goods that are imported shall, except in such circumstances and subject to such conditions as may be prescribed, be reported at the nearest customs office designated for that purpose that is open for business.
(1) Presumption of importation -- For the purposes of this section, all goods reported under section 12 shall be deemed to have been imported.
 Clearly, UPS is either the person who reports the imported goods, or it is the agent for that person (its customer, the importer). It follows therefore that it is jointly and severally liable for the duties under subsection 18(2) of the Customs Act and is therefore liable to pay GST on the value of the goods under section 212 of the ETA. The obligation of UPS to pay the customs duties (and therefore the GST under section 212) is further confirmed by subsection 32(5) which imposes upon a person “authorized under paragraph 6(a) to account for the goods ...” (a licensed customs broker as set out in SOR/86‑944) a liability to pay the GST.
 The amount of $2,900,858 was paid as or on account of tax by UPS. It was paid by mistake or otherwise and therefore subsection 261(1) of the ETA requires the Minister to pay a rebate.
 The appellant did not claim a rebate within the time required under section 261. It is clear from subsection 296(2.1) of the ETA, which I have quoted above, that such an unclaimed rebate must be taken into account in the computation of net tax. I need not elaborate on this point. It was fully dealt with by Bowie J. in Peach Hill Management v. The Queen,  G.S.T.C. (T.C.C.), aff’d  G.S.T.C. 45 (F.C.A.) and by Sheridan J. in SAS Restaurants Ltd. v. The Queen,  G.S.T.C. 159 and by David Sherman in his commentary on Club de Hockey Les Seigneurs de Kamouraska Inc. v. The Queen,  G.S.T.C. 73 (T.C.C.).
 A number of other cases and commentaries were discussed by counsel for the appellant, including a decision of this court in McDonnell v. The Queen,  G.S.T.C. 134 (T.C.C.) and the commentary thereon by David Sherman. I do not think it is necessary to comment further on these arguments. The statutory provisions and the case law are clear. UPS was a person liable to pay the GST on the imported goods. It overpaid it and was entitled to the rebate which it could claim under the mechanism of subsection 296(2.1).
 The appeal is therefore allowed, with costs, and the assessment is referred back to the Minister of National revenue for reconsideration and reassessment on the basis that the appellant is entitled to a rebate of $2,900,858 which may, in accordance with subsection 296(2.1) be taken into account in computing its net tax for the purposes of the GST provisions of the ETA. The Minister should also in reassessing take into account any other adjustments to which he may have agreed at the objection level.
 The evidence was that this was a misprint. It should have read “1997”.

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G.R. No. 90198 November 7, 1995 - PEOPLE OF THE PHIL. v. ANTONIO D. PLASENCIA, ET AL.
G.R. No. 107541 November 16, 1995 - PAMPANGA II ELECTRIC COOP., INC., ET AL., v. NLRC, ET AL.
G.R. No. 107798 November 16, 1995 - PEOPLE OF THE PHIL. v. ORLANDO L. LUTAO, ET AL.
G.R. Nos. 108280-83 & 114931-33 November 16, 1995 - ROMEO SISON, ET AL., v. PEOPLE OF THE PHIL., ET AL.
G.R. No. 111180 November 16, 1995 - DAISIE T. DAVID v. COURT OF APPEALS, ET AL.
G.R. No. 116192 November 16, 1995 - EUFEMIA SARMIENTO v. COURT OF APPEALS, ET AL.
G.R. No. 92418 November 20, 1995 - PEOPLE OF THE PHIL. v. RITA LABRIAGA, ET AL.
G.R. No. 109093 November 20, 1995 - LOPE MACHETE, ET AL., v. COURT OF APPEALS, ET AL.
G.R. No. 109903 November 20, 1995 - ANDRES SUOBIRON, ET AL., v. COURT OF APPEALS, ET AL.
G.R. No. 104846 November 23, 1995 - RODRIGO GABUYA v. ANTONIO LAYUG, ET AL.
G.R. No. 107207 November 23, 1995 - VIRGILIO R. ROMERO v. COURT OF APPEALS, ET AL.
G.R. No. 108958 November 23, 1995 - PEOPLE OF THE PHIL. v. GREGORIO O. DIGNO, JR.
G.R. No. 116149 November 23, 1995 - ELVIRA MATO VDA. DE OÑATE v. COURT OF APPEALS, ET AL.
G.R. No. 118088 November 23, 1995 - MAINLAND CONSTRUCTIONS, CO., INC., ET AL., v. MILA C. MOVILLA, ET AL.
G.R. No. 120426 November 23, 1995 - NICOLAS C. CASTROMAYOR v. COMMISSION ON ELECTIONS, ET AL.
G.R. No. 121510 November 23, 1995 - FABIANA C. VDA. DE SALAZAR v. COURT OF APPEALS, ET AL.
G.R. No. 97258 November 24, 1995 - PEOPLE OF THE PHIL. v. ATANACIO TAHUM, SR., ET AL.
G.R. No. 112909 November 24, 1995 - MOLAVE TOURS CORPORATION v. NLRC, ET AL.
G.R. No. 116813 November 24, 1995 - MAGNOLIA CORPORATION, ET AL. v. NLRC, ET AL.
G.R. No. 100829 November 28, 1995 - LIBERATO SAN ANTONIO v. NATIONAL LABOR RELATIONS COMMISSION, ET AL.
G.R. No. 114282 November 28, 1995 - ACEYORK AGUILAR v. COURT OF APPEALS, ET AL.
Adm. Matter No. MTJ-94-981 November 29, 1995 - ANALYN GIMENO v. CELSO A. ARCUENO, SR.
G.R. No. 116845 November 29, 1995 - RICARDO BEMBO, ET AL. v. COURT OF APPEALS, ET AL.

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