Eileen A. Staats v. City of Palo Alto

Case No.: 2015-1-CV-284956    

This is a class action alleging that the City of Palo Alto unlawfully imposed a Utility Users Tax (“UUT”) on customers of telephone service providers. Before the Court is plaintiff’s motion for preliminary approval of a settlement, which is unopposed.

I. Factual and Procedural Background

According to the allegations of the Class Action Complaint (“Complaint”), in 1987, the City adopted an ordinance establishing the UUT, which authorizes a local tax for telephone services. (Compl., ¶¶ 8-9.) The UUT is automatically charged to City taxpayers each month by telephone providers as part of their normal billing practice on behalf of the City. (Id. at ¶¶ 1, 9.)

For purposes of the UUT ordinance, the City adopted the definition of taxable telephone services prescribed by federal statute in relation to excise taxes. (Compl., ¶ 10.) Beginning in 2005, five federal appellate courts held the federal excise tax statute did not permit the Internal Reven........