Griffith v. Conagra Brands, Inc.
229 W. Va. 190
| W. Va. | 2012Background
- CA Foods created ConAgra Brands to centralize management of its trademarks and licensing; royalties were paid to ConAgra Brands under various license agreements.
- ConAgra Brands owned trademarks and trade names and collected royalties from unrelated licensees distributing products bearing those marks nationwide, including West Virginia.
- ConAgra Brands had no WV offices, inventory, employees, or direct WV sales; licensees sold to WV wholesalers/retailers and provided services in WV, while ConAgra Brands did not itself perform WV-based services.
- During 2000–2003, WV licensees generated substantial WV sales (roughly $19–46M each) and ConAgra Brands earned about $1.156M in royalties from WV activity.
- Audits in 2006 assessed ConAgra Brands for WV corporate net income tax and business franchise tax; Office of Tax Appeals upheld; circuit court later set aside the assessments.
- The WV Supreme Court affirmed the circuit court, holding the licensing activities did not constitute doing business in WV and did not satisfy due process or the Commerce Clause nexus requirements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did ConAgra Brands do business in WV for tax purposes? | ConAgra Brands earned WV royalties and benefited from WV markets. | No WV presence; licensees handled WV distribution; no WV nexus. | No substantial WV business presence; assessments invalid. |
| Do WV taxes violate due process or Commerce Clause? | Minimum contacts and substantial nexus exist via royalties and nationwide licensing. | No physical presence or sufficient nexus; taxes overreach under Commerce Clause. | Taxes fail under both due process and Commerce Clause tests. |
| Is placement of trademarks in stream of commerce sufficient for nexus? | Trademark rights and licensing create economic presence in WV. | Stream-of-commerce alone is insufficient absent activities directed at WV. | Not sufficient here; licensing without WV-directed activities does not establish nexus. |
Key Cases Cited
- Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977) (establishes four-part nexus framework for Commerce Clause taxes)
- Western Maryland Railway Co. v. Goodwin, Comm’r, 282 S.E.2d 240 (Md. 1981) (state taxes must have substantial nexus, be fairly apportioned, non-discriminatory, and fairly related to services)
- Quill Corp. v. North Dakota, 504 U.S. 298 (1992) (distinguishes due process from Commerce Clause nexus; significance of substantial nexus)
- MBNA America Bank, 220 W.Va. 163 (2006) (employed significant economic presence test for Commerce Clause nexus)
- Geoffrey, Inc. v. South Carolina Tax Comm’n, 437 S.E.2d 13 (1993) (licensee/licensor chain can create nexus absent physical presence in forum)
- KFC Corp. v. Iowa Dep’t of Revenue, 792 N.W.2d 308 (2010) (franchise/licensing context; state economic presence within franchise system)
- Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102 (1987) (stream of commerce placement alone not enough without targeted conduct)
- Hill v. Showa Denko, K.K., 188 W.Va. 654 (1992) (discusses stream-of-commerce and jurisdiction in WV; separate from MBNA context)