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 today.

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
Wednesday, 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