Friday, June 27, 2014
C.A. Upholds Ruling on Lack of Standing to Challenge Tax
By a MetNews Staff Writer
The Court of Appeal for this district has rejected a challenge to Los Angeles County’s collection of hotel bed taxes, saying the plaintiff lacked standing to bring it.
Rajendra Pershadsingh had claimed in a class action complaint that a two percent increase in the tax, enacted by the Board of Supervisors in 1991, violated the voter approval requirements of Proposition 62, because the board did not submit the increase to the voters.
Pershadsingh sued after the county turned down his refund claim. He alleged in his claim, and in the complaint, that he had standing because he had paid the tax for a one-night hotel stay.
The county objected, saying the evidence showed that Pershadsingh’s corporation, of which he was the sole officer and shareholder, paid the tax, meaning he lacked standing to sue, either for himself or for the class. Los Angeles Superior Court Judge Elihu Berle agreed, and also denied the plaintiff’s motion to amend the complaint to name the corporation as plaintiff, saying the corporation lacked standing because it did not file a refund claim.
The Court of Appeal Wednesday affirmed the ensuing judgment.
“Compliance with the Government Claims Act is a mandatory requirement before filing suit,” Justice Thomas Willhite Jr. wrote for Div. Four in an unpublished opinion.
The plaintiff’s argument that as a subchapter S corporation, his company’s identity and his own are indistinct is unavailing, Willhite said, because it wasn’t made in the trial court.
Nor does the alter ego doctrine apply, the justice said. The purpose of the doctrine is to prevent the abuse of the corporate form to the detriment of creditors, he explained.
“It does not apply to permit a shareholder to pierce the corporate veil so as to assert a personal claim when the corporation, which has a separate existence, is injured,” Willhite wrote.
An attorney for the county said the ruling saves the county from having to refund $40 million to $50 million in tax collections.
Attorneys on appeal were David W.T. Brown and Paul E. Heidenreich of
Huskinson, Brown & Heidenreich for the plaintiff and Lloyd W. Pellman, Winfield D. Wilson and Stephen P. Wiman of Nossaman LLP for the county.
The case is Pershadsingh v. County of Los Angeles, B247727.
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