Following a ruling by Superior Court Judge Richard E. L. Strauss dismissing a recent challenge from the City of Chula Vista, a trial date has been set for a class action suit seeking millions of dollars in restitution for allegedly illegal utility taxes levied by the City on cell phone users within its boundaries.
The lawsuit stems from a now outdated tax — levied on users of telephones, electricity and other utilities – which was introduced in 1970 and generates more than $9 million in revenue for the city each year. An attempt by the City to amend the law with Proposition H in 2010 was defeated by voters.
According to Thomas Pen-field, a partner with San Diego-based Casey Gerry and co-lead counsel, the City of Chula Vista recently filed a legal objection to the suit — technically known as a demurrer — which challenged the sufficiency of complaint. “The City cited its local ordinance which said you cannot file a class action for a tax refund,” said Penfield. In their briefs, Penfield and co-counsel James Capretz of Orange County-based Capretz & Associates argued that municipalities are not permitted to enact their own patchwork means of claiming tax refunds. “The judge agreed with our argument and ruled in our favor – stating that state procedure overrules the local ordinance,” Penfield explained.
According to Capretz, the case is now set to go to trial January 18, 2013. “This is about a flagrant violation of the law and disrespect for the will of the people,” he said. Ultimately, “the City of Chula Vista’s illegal taxing of its citizens shows a dangerous disrespect for the law.”
“Through this class action, we seek a refund for back taxes unlawfully collected over the years,” Penfield added. “Chula Vista taxpayers are entitled to a refund of all utility users taxes (UUTs) improperly collected for the maximum period permissible, along with all other relief provided by law.”
The City of Chula Vista – the second largest City in San Diego County — is taxing without authority, Penfield said. “The tax on cell phones is illegal, as the law introducing it was passed before the invention of cell phones,” he said. Moreover, “the UUT is automatically added to the monthly charges and embedded in detailed billing statements, so most tax payers are not even aware of the tax. The monies collected were siphoned from the local economy and belong to the cell phone using residents of Chula Vista, and in all fairness, should be returned,” said Penfield. “That’s what fair and responsible representatives would do.”