Landmark Settlement of Telephone Tax Case

WHAFH Reports Settlement of Landmark Telephone Tax Case

On October 25, 2016, Judge Lisa Hart Cole of the Los Angeles Superior Court issued an Order granting final approval of the $92.5M settlement with the City of Los Angeles (the “City”) in a class action (Ardon v. City of Los Angeles, Case No. BC363959) arising from claims that the City had improperly collected its 10% Telephone Utility Users Tax during a Class Period extending from October 19, 2005 through March 15, 2008. The order also approved Plaintiff’s request for attorneys’ fees and expenses in the amount of $18.5M and provided for an Incentive Award to Plaintiff Ardon in the amount of $10K. The Order was conditioned solely on the filing of a fully executed copy of the Second Amended Settlement Agreement. That filing took place on October 25, 2016.

The Court’s Order involves a vigorously contested 10-year litigation that involved numerous novel and complex questions requiring the parties to make two trips to the California Supreme Court for resolution. Most importantly, for California taxpayers, Plaintiff obtained unanimous Supreme Court reversal of trial court and appellate district opinions against him in a landmark decision and established the right of taxpayers to file a class claim for tax refunds from governmental entities in the absence of a specific prohibition in a governing claims statute. Commentators at the time termed the decision a “fundamental shift in court precedent” in the generally accepted understanding of the law that class claims against governmental entities were impermissible. The matter was orally argued before the California Supreme Court by Francis M. Gregorek of Wolf Haldenstein Adler Freeman & Herz LLP (“Wolf Haldenstein”)

In granting the Plaintiff’s request for fees and expenses, the Court found that “given the quality of the representation, the novelty and difficulty of the issues presented and the skill displayed by the lawyers in presenting them, the results achieved on behalf of the class and the contingent nature of the fee award, the Court has no trouble finding that this positive multiplier is warranted”. Order p. 21.

Plaintiff was represented in this action by Daniel W. Krasner, Francis M. Gregorek, Rachele R. Rickert and Marisa C. Livesay of Wolf Haldenstein; Nicholas Chimicles and Timothy Mathews of Chimicles & Tikellis LLP; Jon Tostrud of the Tostrud Law Group, PC and Jon Cuneo of Cuneo Gilbert & Laduca, LLP