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Judge OKs pursuit of lawsuit

September 22, 2012 News Articles

Chula Vista residents who paid an “unlawful” telephone users tax (TUT) on their mobile phone service may have their claims addressed in one lawsuit, a San Diego Superior Court judge ruled.

If the class action lawsuit is successful, it could enable more than 100,000 Chula Vista residents to receive millions in refunds over the last few years.

Judge Richard E.L. Strauss certified the case last Friday.

“Based on the evidence submitted by the parties, the court finds that plaintiffs have met their burden of establishing the existence of an ascertainable class, and a well-defined community of interest among the class members,” Strauss wrote in his ruling.

San Diego-based law firm CaseyGerry and Newport Beach-based law firm Capretz & Associates jointly filed the lawsuit, Carla Villa v. the city of Chula Vista, last year. They maintain the city is charging an “illegal” five percent fee based on a 1970 tax on users of mobile telephones, electricity and other utilities.

The firms are demanding restitution as a result of the continued collection of the controversial tax, which the city attempted to modernize through Prop. H in 2010, but was defeated by the majority of voters.

Plaintiffs are suing for declaratory, injunctive, monetary and other relief, seeking millions in compensation for services rendered by local utility companies.

“Assuming we prevail on the merits, we’re probably looking at $20 to a few hundred per resident, base on the phone bills I’ve looked at,” CaseyGerry attorney Jeremy K. Robinson said.

Outside counsel Colin Murray with Baker&McKenzie LLP, said the city continues to collect the tax.

“Our position is, municipalities all over the state collect a similar tax under similar ordinances,” Murray said. “The original ordinance never intended to exempt from taxation the usage of mobile communication devices that are in common use today.”

Robinson said that many taxpayers are unaware that they already pay the tax on their mobile phone service through an automatic monthly charge embedded in detailed billing statements.

The tax generates more than $9 million in revenue for the city each year.

Robinson said that next steps include figuring out, between the judge and city, what noticing procedure will be best to help residents figure out if they’re a member of the class or not.

“We hope … that the case can proceed to trial and a favorable decision is made on the merits,” Robinson said. “This would force the city to go through the refund procedures and give the money back to residents.”

In February, Strauss overruled a challenge by the city to dismiss the class-action lawsuit, saying the state law that allows class-action lawsuits for tax refunds trumps local statutes.

Plaintiff’s attorney Thomas D. Penfield said then that the tax is a blatant violation of the city’s municipal code, which prohibits taxes on mobile phones.

Murray said the city’s goal is to seek a determination that the allegations lack merit and the tax has been properly imposed.

“Our basic argument is that it was originally a usage tax, it’s still a usage tax, and the city is authorized to impose a tax on the usage of mobile communication devices in order to compensate the city for the infrastructure impact,” he said.

The case is set to go to trial on Jan. 18, 2013.