Palo Alto will seek a new trial from the same judge March 10 in its December loss of its lawsuit against Verizon Wireless, according to City Attorney Gary Baum.
The request for a new trial is a possible precursor of a formal appeal of the case, and comes in the face of a separate lawsuit against Palo Alto seeking a refund of more than $1,000 in Utilities Users' Tax fees paid by one resident to Sprint.
The city was sued last week by a man hoping to recover more than $1,000 in taxes charged on his cell-phone bill, and the man's attorney is hoping to turn the case into a class-action lawsuit against the city on behalf of any cell-phone customer the city has taxed.
The city taxes all "intrastate" telephone calls a 5 percent charge though its Utility Users Tax. City voters approved the tax in 1987, prior to the widespread introduction of cellular phones.
Earlier this month, a judge ruled against a lawsuit the city filed against the Verizon telephone company in 2004. The city was seeking approximately $2 million in back taxes it alleged Verizon never paid.
On Jan. 25, Superior Court Judge Jamie Jacobs-May granted a motion filed by Verizon's lawyers that cited recent federal cases where judges ruled against the federal government's attempts to continue charging a federal tax on cell-phone calls.
Palo Alto City Attorney Gary Baum said the city was planning to challenge the judge's ruling at a hearing on March 10. Other cell-phone carriers are continuing to charge their customers the tax in Palo Alto.
Citing the Verizon lawsuit, Burlingame-based attorney Christopher Shenfield filed a lawsuit in Santa Clara County Superior Court last week seeking back taxes on behalf of all cell-phone customer who Palo Alto has taxed. The initial plaintiff is Allen Albert Atwood III, a 49-year-old computer consultant who's paid $1,023 in such taxes to Sprint PCS from December 1997 to January 2006, according to Shenfield's complaint.
Shenfield said he also considered filing lawsuits against the cell-phone carriers, which pay the tax to the city, but deciding suing the city directly made "more sense."
Shenfield argued the city owes between $10.2 million to $27 million to cell-phone customers, although he refused to state where that estimate arose. Baum argued it was a "ridiculous" figure.
Palo Alto officials estimate the city gets $1.5 million per year from the tax from cell-phone customers. That amount has grown dramatically in recent years as cell phone use exploded.
The $1.5 million is roughly equivalent to half the city's arts and culture budget, or roughly the same amount the police department spends on traffic services.
Cell-phone calls are fundamentally different from traditional landline calls, Shenfield noted, because the caller is charged only based on the length of call, not the call's distance. As a result, Palo Alto's tax on local calls does not apply to cell phones, he argued.
Approximately 100 California cities have similar taxes, Baum noted.
"No court in California has found that the Utility Users Tax is impermissible using this argument," he said.
Baum said he's never heard of a class-action lawsuit against a city on any topic.
"The law doesn't permit that method of suing a city, as far as I'm concerned," he said.
Because of the ongoing litigation with Verizon, Baum argued the new lawsuit was "premature."