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Sipple v. City of Hayward

California Court of Appeals, Second District, Second Division

April 8, 2014

DONALD SIPPLE et al., Plaintiffs and Appellants,
v.
CITY OF HAYWARD et al., Defendants and Respondents.

APPEAL from a judgment of the Superior Court of Los Angeles County No. BC462270. William F. Highberger, Judge.

Page 350

[Copyrighted Material Omitted]

Page 351

COUNSEL

Morris and Associates, Stephen B. Morris; Bartimus, Frickleton, Robertson & Gorny, James P. Frickleton and Edward D. Robertson, Jr., for Plaintiffs and Appellants Donald Sipple, John Simon, Karl Simonsen and Christopher Jacobs.

Doyle Law and Conal F. Doyle for Plaintiff and Appellant New Cingular Wireless PCS LLC.

Jarvis, Fay, Doporto & Gibson, Benjamin P. Fay, Andrea J. Saltzman and Rick W. Jarvis for Defendants and Respondents City of Hayward, City of Modesto, City of Palo Alto, City of Redwood City, City of San Luis Obispo and City of Santa Barbara.

Colantuono & Levin, Michael G. Colantuono, Holly O. Whatley and Amy C. Sparrow for Defendant and Respondent Alhambra Coalition.

Richards, Watson & Gershon, Lisa Bond and Andrew Brady for Defendants and Respondents City of Compton, City of Hawthorne, City of Long Beach and City of Redondo Beach.

Meyers, Nave, Riback, Silver & Wilson, Deborah J. Fox, Peter S. Hayes and Mary C. Tsai for Defendants and Respondents City of Desert Hot Springs, City of Downey, City of El Cerrito, City of Pasadena, City of Pinole and City of San Leandro.

Page 352

Barbara J. Parker, City Attorney, Doryanna Moreno, Chief Assistant City Attorney, William E. Simmons, Trial Attorney, Kathleen Salem-Boyd, Deputy City Attorney; and Christopher Kee for Defendant and Respondent City of Oakland.

Dennis J. Herrera, City Attorney, Julie Van Nostern, Chief Tax Attorney, and Peter J. Keith, Deputy City Attorney for Defendant and Respondent City and County of San Francisco.

Lagerlof, Senecal, Gosney & Kruse, James D. Ciampa and Jenny Kim for League of California Cites and California State Association of Counties as Amici Curiae.

OPINION

BOREN, P.J.

For a number of years, individuals throughout California were improperly charged taxes for internet access by their internet service provider, New Cingular Wireless PCS LLC (New Cingular), prompting various customers to file putative class action lawsuits. The lawsuits eventually settled, with New Cingular agreeing to seek refunds of the taxes from the cities and counties to which the taxes were remitted. After refund claims were denied, New Cingular (and various individual plaintiffs purporting to act on behalf of other customers) brought this action against the cities and counties.

The trial court sustained demurrers without leave to amend, finding, among other things, that New Cingular lacked standing to pursue refund claims against the defendant cities and counties. Because we determine that New Cingular has adequately alleged standing to bring an action for tax refund, we reverse, in part, the trial court’s judgment.

BACKGROUND

Plaintiff and appellant New Cingular, along with plaintiffs and appellants Donald Sipple, John Simon, Karl Simonsen, and Christopher Jacobs (the individual plaintiffs), filed suit for tax refunds against 132 California cities and two California counties. Following the filing of demurrers, and after settlements were reached with a number of cities, appellants filed a first amended complaint (FAC) against 115 California cities and two California counties. The FAC alleged causes of action for: tax refund, unjust enrichment, money had and received, and violation of due process. Demurrers to the FAC were sustained without leave to amend.

Page 353

The underlying class litigation

This lawsuit arose out of the class litigation involving New Cingular. According to the FAC, the Internet Tax Freedom Act, 47 United States Code section 151, imposed a national moratorium on state and local government taxation on internet access. In its monthly bills to customers, New Cingular (an affiliate of AT&T Mobility LLC (AT&T Mobility)) erroneously charged its customers taxes on internet access over a span of several years and remitted those taxes to the defendant cities and counties.

Putative class actions were filed against AT&T Mobility and affiliates in California federal district courts by the individual plaintiffs on behalf of California consumers, alleging that they were improperly charged for internet access taxes that were then remitted to California municipalities. Similar lawsuits were filed in other venues throughout the United States. The cases were ultimately consolidated in a multi-district litigation proceeding in the the United States District Court for the Northern District of Illinois.

The multi-district litigation was eventually settled, and, for purposes of the settlement, a series of subclasses, including a California settlement subclass with the individual plaintiffs as representatives, was certified by the District Court for the Northern District of Illinois. In approving the settlement, the district court found that the settlement agreement bound only the parties privy to it (i.e., the class members and AT&T Mobility and its affiliates), and that the agreement did not purport to dictate the effect of any state or local laws. (See In re AT&T Mobility Wireless Data Services Sales Tax Litigation (N.D.Ill. 2011) 789 F.Supp.2d 935, 983.)

Under the terms of the settlement agreement, AT&T Mobility, which was defined as including affiliates such as New Cingular, agreed to process and assist in processing refund claims in the many taxing jurisdictions in which internet taxes were paid, including in the defendant cities and counties. On behalf of the class members, AT&T Mobility was to file claims in jurisdictions in which it had standing to seek refunds of the taxes. The class members expressly authorized AT&T Mobility to file the refund claims. The settlement agreement further provided that in the event a claim was denied, AT&T Mobility would “cooperate in the appeal” and would “retain the right but not the obligation to appeal, otherwise contest, or further prosecute an appeal of any adverse ruling or decision in the event that Settlement Class Counsel declines to do so for any reason.” Any refunds granted by the taxing entities were to be paid or transferred to escrow accounts, and eventually paid ...


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