Los Angeles will pay up to $92.5 million to taxpayers and attorneys to settle a long-running lawsuit over a city telephone tax under a tentative settlement proposal given preliminary approval Thursday.
The city has agreed a maximum of $92.5 million, but the ultimate amount will depend on how many people seek and obtain refunds from the settlement fund, according to the proposal, the Los Angeles Times reported. Any money not claimed would revert back to the city.
The proposed settlement, discussed by city lawmakers behind closed doors Thursday, was granted preliminary approval by a Los Angeles County Superior Court judge today, according to Los Angeles City Attorney’s Office spokesman Rob Wilcox.
Almost nine years ago, taxpayer Estuardo Ardon filed a lawsuit against the city arguing its telephone users tax was illegally collected because it had been levied on services not subject to a federal tax, according to The Times. Ardon demanded a refund for himself and other taxpayers.
The California Supreme Court ruled four years ago the lawsuit could proceed.
City officials have estimated that if the case went to trial, the possible liability for Los Angeles — once believed to be as high as $750 million — would not exceed $300 million, according to Assistant City Administrative Officer Benjamin Ceja, The Times reported.
L.A. leaders set aside $50 million this year as a reserve for legal liabilities tied to tax cases.
Refunds would be offered only to people who paid such taxes during a time window before the telephone users tax targeted in the lawsuit was replaced with a slightly lower tax approved by Los Angeles voters seven years ago.
—City News Service