Case Name: Eileen A. Staats v. City of Palo Alto
Case No.: 2015-1-CV-284956

This is a putative 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 to certify a class, which the City opposes.

I. Factual and Procedural Background

According to the allegations of the Class Action Complaint (“Complaint”), plaintiff Eileen A. Staats is a resident of the City and a customer of cellular phone service provider(s). (Complaint, ¶ 1.) Plaintiff has paid and continues to pay the City’s UUT to these cellular phone providers. (Ibid.) Plaintiff’s service providers have collected and continue to collect the UUT as part of their normal billing practice on behalf of the City. (Ibid.) Plaintiff alleges that the UUT has been impermissibly assessed and collected from her and similarly situated taxpayers because it does not apply to (1) mobile phone services; (2) services that include long distance telephone service where the charge varies only by time; and (3) charges for “bundled service.” (Id. at ¶¶ 24, 27.) Internal Revenue Service Notice 2006-50, a key authority supporting plaintiff’s interpretation of the relevant statutes, defines “bundled” service as a plan that includes both local and long distance services without separately stating the charge for the local service.

The Complaint, filed on August 27, 2015, asserts the following causes of action: (1) declaratory relief; (2) money had and received; (3) unjust enrichment; (4) writ of mandamus; (5) illegal imposition of tax invalid under Government Code § 53723; and (6) violation of California Constitution Article XIII, C § 2 (also known as Proposition 218), invalid tax due to failure to obtain voter approval. The Complaint defines the putative class as follows:

All persons, including individuals, non-corporate entities, and corporations, wherever organized and existing, who have paid the [UUT] on mobile phone services and who have paid for telephone services which are not taxable under IRC § 4251. This class includes all cellular customers, long distance landline customers, and customers of “bundled services” who have been improperly taxed since at least the effective date when the I.R.S., in its Notice 2006-50, conceded the tax was improper.

The City answered on December 18, 2015. The parties proceeded with discovery, and plaintiff moved to certify the class on May 5, 2017. Before the City filed its opposition papers, the hearing on plaintiff’s motion was vacated on June 23 to allow plaintiff to file additional declarations in support of her motion. Plaintiff filed these declarations on September 7, and the hearing on the motion for class certification was rescheduled for March 16, 2018.

On November 28, 2017, the City filed a motion for leave to amend its answer to assert an equitable setoff defense, and the Court granted its motion on December 28. The Court rescheduled the hearing on plaintiff’s class certification motion to April 6, 2018.

II. Legal Standard

As explained by the California Supreme Court,

The certification question is essentially a procedural one that does not ask whether an action is legally or factually meritorious. A trial court ruling on a certification motion determines whether the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.

(Sav-On Drug Stores, Inc. v. Superior Court (Rocher) (2004) 34 Cal.4th 319, 326, internal quotation marks, ellipses, and citations omitted.)

California Code of Civil Procedure section 382 authorizes certification of a class “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court ….” As interpreted by the California Supreme Court, section 382 requires: (1) an ascertainable class and (2) a well-defined community of interest among the class members. (Sav-On Drug Stores, Inc. v. Superior Court, supra, 34 Cal.4th at p. 326.)

The “community-of-interest” requirement encompasses three factors: (1) predominant questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class. (Sav-On Drug Stores, Inc. v. Superior Court, supra, 34 Cal.4th at p. 326.) “Other relevant considerations include the probability that each class member will come forward ultimately to prove his or her separate claim to a portion of the total recovery and whether the class approach would actually serve to deter and redress alleged wrongdoing.” (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435.)

The plaintiff has the burden of establishing that class treatment will yield “substantial benefits” to both “the litigants and to the court.” (Blue Chip Stamps v. Superior Court (Botney) (1976) 18 Cal.3d 381, 385.) The court must examine all the evidence submitted in support of and in opposition to the motion “in light of the plaintiffs’ theory of recovery.” (Department of Fish and Game v. Superior Court (Adams) (2011) 197 Cal.App.4th 1323, 1349.) The evidence is considered “together:” there is no burden-shifting as in other contexts. (Ibid.)

III. Evidentiary Issues

Plaintiff’s request for judicial notice of Internal Revenue Service Notice 2006-50 and of Palo Alto Ordinance No. 5291 (Exs. 1 and 2) is GRANTED. (Evid. Code, § 452, subds. (b) and (c).) The City’s request for judicial notice is similarly GRANTED as to ordinances and resolutions adopted by the City, as well as its charter and 2018 budget (Exs. A-H). The City’s request is also GRANTED as to a prior order in this action denying the City’s motion for judgment on the pleadings (Ex. I). (Evid. Code, § 452, subd. (d).) These requests for judicial notice are unopposed.

Plaintiff’s request for judicial notice of unpublished California trial court opinions addressing settlement and/or class certification in cases involving other cities’ telephone utility users’ taxes, which was submitted with her reply brief, is DENIED. Unpublished California opinions “must not be cited or relied on by a court or a party in any other action.” (Cal. Rules of Court, rule 8.1115(a).) In any event, these rulings are devoid of analysis regarding the specific issues presented by plaintiff’s motion to certify the class. In light of this ruling, the Court need not address the City’s challenges to this request presented in the form of objections to evidence.

The City’s objections to the original Declaration of William Fitzsimmons submitted in support of plaintiff’s motion are SUSTAINED with regard to the statements identified in objections no. 1-4. The City correctly contends that Dr. Fitzsimmons lacks personal knowledge of carriers’ billing databases and has not shown that he has the knowledge, skill, experience or training to provide an expert opinion on the mechanics of extracting specific customer-level data from such databases, or that an expert opinion would assist the trier of fact on this subject. The City’s objections are OVERRULED as to the statement identified in objection no. 5 since expert witnesses may rely on hearsay and Mr. Fitsimmons is qualified to draw a conclusion regarding the availability of historic customer-specific bills based on interviews with and the review of comments by carrier representatives on this subject. The City’s objection to Exhibit 1 to Dr. Fitzsimmons’s supplemental declaration, an uncertified deposition transcript from another action, is SUSTAINED insofar as that testimony is offered to establish AT&T’s specific policies and procedures, rather than to support of Dr. Fitzsimmons’s expert opinion that most wireless plans are not billed based on time and distance. (See People v. Sanchez (2016) 63 Cal.4th 665, 686 [although experts may rely of hearsay in forming their opinion, they may not “relate as true case-specific facts asserted in hearsay statements, unless they are independently proven by competent evidence or are covered by a hearsay exception”].)

Plaintiff’s objections to the declaration of Christina Lawrence submitted in opposition to plaintiff’s motion are OVERRULED. The printouts attached to the declaration are presumed to be accurate representations of the telephone carriers’ web sites they purport to represent (Evid. Code, § 1552) and are not offered as business records. As urged by the City, carriers’ advertisement of certain service plans is evidence that such plans were offered by the carriers. The variation in plans is relevant to the Court’s assessment of the predominance of common factual issues.

Plaintiff’s objections to the declaration of Ray Horak submitted in opposition to plaintiff’s motion are also OVERRULED. Plaintiff argues that Mr. Horak is not qualified to offer an expert opinion regarding the process by which customer-specific information can be retrieved from telecommunications records. While the Court agrees with this conclusion, Mr. Horak does not purport to offer an opinion on this subject, and plaintiff does not dispute his qualifications to opine on the history of the telecommunications industry, a subject which is relevant to the issues presented by plaintiff’s motion.

The City’s objection to plaintiff’s reply brief and reply evidence is OVERRULED. Plaintiff’s reply evidence is responsive to the evidence submitted by the City in support of its opposition and does not raise any new substantive issues. The Court will also exercise its discretion to consider plaintiff’s reply brief although it exceeds the page limit established by Judge Kuhnle. It notes that the City’s opposition brief similarly appears to avoid the page limit through formatting modifications, and cautions both parties to respect page limitations in the future.

IV. Relevant Substantive Law and Areas of Dispute

The parties agree that during the proposed class period, the Palo Alto Municipal Code required telecommunications providers to collect the UUT from subscribers and remit it to the City on a monthly basis. The Code provided that the UUT would not be imposed with respect to services not subject to taxation under section 4251 of the Internal Revenue Code.

Critically, the parties dispute whether and under what conditions the cellular, long distance landline, and “bundled” services at issue in this action are encompassed by section 4251. While a court generally will not consider merits issues like these on a motion for class certification, sometimes, the merits are “enmeshed” with class action requirements. (Brinker Restaurant Corp. v. Superior Court (Hohnbaum) (2012) 53 Cal.4th 1004, 1023.) “When evidence or legal issues germane to the certification question bear as well on aspects of the merits, a court may properly evaluate them.” (Id. at pp. 1023-1024.) “In particular, whether common or individual questions predominate will often depend upon resolution of issues closely tied to the merits,” as the court “must determine whether the elements necessary to establish liability are susceptible of common proof ,” which “can turn on the precise nature of the element and require resolution of disputed legal or factual issues affecting the merits.” (Id. at p. 1024.) However, “[s]uch inquiries are closely circumscribed. … [A]ny ‘peek’ a court takes into the merits at the certification stage must be limited to those aspects of the merits that affect the decisions essential to class certification.” (Ibid., internal citations and quotations omitted.)

Here, an understanding and preliminary evaluation of the parties’ disputes is relevant to the Court’s assessment of whether the class is ascertainable and manageable. It is therefore necessary to discuss the scope and interpretation of the statute in some detail.

A. Applicable Law and Plaintiff’s Theory of Recovery

Internal Revenue Code section 4251 provides for a tax on “local telephone service,” “toll telephone service,” and “teletypewriter exchange service,” as defined in section 4252. “Local telephone service” is “the access to a local telephone system …” and does not include a “toll telephone service” (26 U.S.C. § 4252(a)), while a “toll telephone service” is

(1) a telephonic quality communication for which (A) there is a toll charge which varies in amount with the distance and elapsed transmission time of each individual communication and (B) the charge is paid within the United States, and

(2) a service which entitles the subscriber, upon payment of a periodic charge (determined as a flat amount or upon the basis of total elapsed transmission time), to the privilege of an unlimited number of telephonic communications to or from all or a substantial portion of the persons having telephone or radio telephone stations in a specified area which is outside the local telephone system area in which the station provided with this service is located.

(26 U.S.C. § 4252(b).) “Teletypewriter exchange services” are not at issue in this case.

Beginning in 2005, five federal courts of appeal held that one type of long distance telephone service that is common today, with a toll charge that varies only with time and not with distance (“time-only service”), is not taxable under section 4251. In 2006, the Internal Revenue Service issued Notice 2006-50, which declared that based on these cases, section 4251 did not apply to any long distance service or to “bundled service,” defined as local and long distance service provided under a plan that does not separately state the charge for the local telephone service. (Pl.’s Request for Judicial Notice, Ex. A, p. 5.) Under Notice 2006-50, only “local-only service” provided under a plan that does not include long distance or that separately states the charge for local service remained taxable. Plaintiff contends that Notice 2006-50 sets forth the correct interpretation of section 4251 and, accordingly, the UUT.

While plaintiff contends that Notice 2006-50 is “conclusive,” the Notice was prospectively vacated by a federal court in 2012. (See In re Long-Distance Telephone Service Federal Excise Tax Refund Litigation (D.D.C. 2012) 853 F.Supp.2d 138, 146.) More fundamentally, IRS notices “d[o] not carry the authority of binding law”(Ferman v. U.S. (5th Cir. 1993) 993 F.2d 485, 491), and the level of deference to which they are entitled is unclear. (See Pritired 1, LLC v. U.S. (S.D. Iowa 2011) 816 F.Supp.2d 693, 728 [“A notice is akin to a ‘revenue ruling’ and is an interpretation of the law offered by the IRS. While not binding precedent, revenue rulings—and notices—are entitled to ‘some weight,’ because the IRS ‘consider[s] them authoritative and binding.’ ”], citing Bankers Life and Cas. Co. v. U.S. (7th Cir. 1998) 142 F.3d 973, 978 [question of deference to be accorded to revenue rulings “has generated inconsistent rulings ranging from Chevron deference to no deference”].) And even if notices and similar IRS authorities are entitled to deference in other circumstances, they must be disregarded if they conflict with the clear meaning of a statute. (See Reese Bros., Inc. v. U.S. (3d Cir. 2006) 447 F.3d 229, 237-238.)

B. The City’s View

The City contends that Notice 2006-50’s interpretation of section 4251 was wrong because, pursuant to section 4252(b)(2), flat-rate long distance service including “bundled” service is taxable under section 4251, notwithstanding the federal cases interpreting 4252(b)(1) with regard to per-call long distance charges. This interpretation is supported by dictum in federal opinions. (See, e.g., Reese Bros., Inc. v. U.S., supra, 447 F.3d at p. 240 [“We agree … that section 4252(b)(2) describes a toll service for which the customer pays either a fixed dollar amount per month for an unlimited number of calls, or a fixed dollar amount per month for a fixed number of minutes or hours of use without regard to the number of calls placed.”]; America Online, Inc. v. U.S. (Fed. Cl. 2005) 64 Fed.Cl. 571, 582 [“Section 4252(b) divides the types of toll telephone services into charges based on individual calls, which are covered by Section 4252(b)(1), and periodic charges for unlimited calls, covered by Section 4252(b)(2)”]; Reese Bros., Inc. v. U.S. (W.D. Pa. Nov. 30, 2004) 2004 WL 2901579, *6 [“§ 4252(b)(2) describes a service where a charge is made for an unlimited number of calls or for a fixed number of hours to or from persons outside the local telephone system area”].) The City argues that it is also supported by the plain language of the statute as set forth above, notwithstanding Notice 2006-50.

Plaintiff does not address section 4252(b)(2) in her moving papers, and in her reply papers, she discusses it largely in footnotes. As noted therein, “[s]ection 4252(b)(2) was enacted to cover the AT & T WATS service then in existence” (Fortis, Inc. v. U.S. (S.D.N.Y. 2004) 420 F.Supp.2d 166, 184, aff’d (2d Cir. 2006) 447 F.3d 190), which plaintiff represents is largely inactive today. (See Reply, p. 8-10, fns. 1-3.) However, plaintiff’s own authority holds that in determining whether section 4252(b)(2) applies to a telephone service, the issue is not whether that service was historically described as WATS, but “whether the service falls within the definition in § 4252(b)(2) by involving a periodic charge, based on a flat rate or total elapsed transmission time, for unlimited calls to a specified area.” (Fortis, Inc. v. U.S., supra, 420 F.Supp.2d at p. 184; see also USA Choice Internet Services, LLC v. U.S. (Fed. Cir. 2008) 522 F.3d 1332, 1340 [“the statutes and legislative histories indicates [sic] that the purpose of the 1965 amendments with respect to WATS related to the flat-rate long distance characteristics of the service”].) That the statute was drafted with a particular service in mind does not suggest that its application is forever limited to that identical service. (See In re WorldCom, Inc. (2d Cir. 2013) 723 F.3d 346, 363 [noting in analyzing a different provision of section 4252, “we cannot simply say the statute is ‘too old’ and decline to apply it to this newer technology”].) Beyond bare references to the vacated Notice 2006-50, plaintiff offers no reasoning in support of her position that section 4252(b)(2) does not apply to flat-rate long distance services. It would be improper to deny class certification on the ground that plaintiff’s position lacks legal merit (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429), but this is a material issue with regard to ascertainability, predominance, and manageability as discussed below.

In addition to its argument regarding section 4252(b)(2), the City raises an issue regarding the definition of taxable local telephone service under section 4252(a), arguing that local landline calling areas are defined by a plethora of regulatory schemes, and it is not clear how they are defined in the context of cellular service. (See Opp. at pp. 8-9.) However, the Court is not persuaded that difficulties in defining a local telephone service are insurmountable. As the City’s own expert declares, “the definitions of and distinctions between local exchange service and long-distance service have remained essentially the same” for the past 140 years, “at least in the wireline domain.” (Decl. of Ray Horak ISO Opp., ¶ 16.) There is no indication that charges associated with non-bundled local landline service are not identifiable from users’ bills. The City will of course be permitted to argue that the various types of local landline service were appropriately taxed should any dispute arise in this regard, but plaintiff does not appear to contend that any specific type of local landline service other than “bundled” service is taxable. As to wireless phones, several authorities undermine the City’s argument that any such plans could be considered local telephone services. (See, e.g., OfficeMax, Inc. v. U.S. (6th Cir. 2005) 428 F.3d 583, 600 [“the definition contemplates a service with limited geographic reach, not a plan that makes use of an untold number of local services”]; Fortis, Inc. v. U.S. (S.D.N.Y. 2004) 420 F.Supp.2d 166, 184 [“It is hardly a plain or natural reading of the statute to claim that the entire United States is part of one ‘local telephone system.’ ”], aff’d (2d Cir. 2006) 447 F.3d 190.) While the City will be permitted to argue that all or certain types of wireless plans constitute local telephone services under section 4252(a), the Court expects this argument will be susceptible to classwide analysis or can be addressed through the creation of subclasses. In sum, the Court concludes that it is feasible and appropriate to exclude purely local landline services from the class definition as plaintiff appears to concede is proper, and to address the City’s arguments regarding local service provided to wireless users at a later juncture.

Finally, the City contends that under the Mobile Telecommunications Sourcing Act (“MTSA”), wireless carriers may tax nontaxable services “bundled” with taxable services under a single charge, unless the carrier can reasonably identify the non-taxable charges from its books and records. (See Opp. at p. 11.) The Court expresses no opinion on the merits of this argument, but is not convinced that it impacts class certification. For the reasons discussed below, the Court will not certify a class including “bundled” service users at this juncture, but if it were to do so in the future, it appears that this group could be effectively managed as a subclass.

With this background in mind, the Court will address the specific requirements for class certification.

V. Numerous and Ascertainable Class

“The trial court must determine whether the class is ascertainable by examining (1) the class definition, (2) the size of the class and (3) the means of identifying class members.” (Miller v. Woods (1983) 148 Cal.App.3d 862, 873.) Generally, “[c]lass members are ‘ascertainable’ where they may be readily identified without unreasonable expense or time by reference to official records.” (Rose v. City of Hayward (1981) 126 Cal. App. 3d 926, 932.) Even where this is not the case, where the definition “describes a set of common characteristics sufficient to allow a member of that group to identify himself or herself as having a right to recover based on the description, and the plaintiff has proposed an objective method for identifying class members when that identification becomes necessary, there exists an ascertainable class.” (Aguirre v. Amscan Holdings, Inc. (2015) 234 Cal.App.4th 1290, 1306.) Ascertainability is required in order to give notice to putative class members as to whom the judgment in the action will be res judicata; merits-related issues like whether class members will be able to prove their damages are not to be considered in relation to this factor. (See Cohen v. DIRECTV, Inc. (2009) 178 Cal.App.4th 966, 975-976 [“The defined class of all HD Package subscribers is precise, with objective characteristics and transactional parameters, and can be determined by DIRECTV’s own account records. No more is needed.”].)

Presenting a truncated version of the definition set forth in the Complaint, plaintiff seeks to certify a class of “[a]ll persons, including individuals, non-corporate entities, and corporations, who have paid the City of Palo Alto Utility Users Tax imposed by Palo Alto Utility Users Tax Ordinance (“AUUTO”) § 3-59.4 on mobile phone services and who have paid for telephone services which are not taxable under IRC § 4251 between August 1, 2006 to December 18, 2014.” Plaintiff contends that the class can be identified either from telephone service providers’ records or through self-identification by class members based on their telephone bills.

As noted by the City, there are several errors or problems with the proposed class definition; however, the Court is obligated to address these issues by amending the definition if possible. (See Marler v. E.M. Johansing, LLC (2011) 199 Cal.App.4th 1450, 1462 [where there is an ascertainable class, “plaintiffs’ rights should not be forfeited because of counsel’s choice of words in the complaint or class certification motion”; the court itself can and should redefine the class where the evidence shows such a redefined class would be ascertainable].)

Two issues are readily addressed. First, the UUT was found in section 2.35.090 of the Palo Alto Municipal Code, not section 3-59.4 (which does not exist). Second, plaintiff’s Complaint and briefing demonstrate that she seeks to represent a class that includes landline customers, but the proposed class definition may be interpreted as limiting the class to “mobile” customers. These issues can be readily addressed by minor amendments to the class definition.

A third issue is more involved. While plaintiff makes some attempt to show that class members may be identifiable from telephone service providers’ records, she ultimately relies on class members’ ability to self-identify in arguing that the class is ascertainable. However, the class is defined with reference to persons “who have paid for telephone services which are not taxable under IRC § 4251,” which is not an objective criteria that class members would readily understand. Alternatives to this definition can be found both in the definition proposed in plaintiff’s Complaint, which refers to “cellular customers, long distance landline customers, and customers of ‘bundled services’ ” and in plaintiff’s reply brief, which refers to “telephone services other than purely local [landline] service, teletypewriter exchange or long distance measured by both time and distance.” (Reply at p. 16.) As there seems to be no dispute that teletypewriter exchange and long distance measured by both time and distance are obsolete, these two alternative definitions are substantially consistent, encompassing all but purely local landline services. For the reasons discussed above, the Court concludes that this is an ascertainable group.

The issue is the specific language with which this group should be defined to facilitate the identification of class members and the management of this action. In light of the parties’ fundamental dispute regarding the taxability of flat-rate mobile or long distance landline service under section 4252(b)(2), the Court concludes that a subclass should be created to address the significant portion of the class whose liability turns on this issue. There does not appear to be cause to distinguish between mobile and landline users in this group at this juncture (although, again, the City will be permitted to raise issues in this regard as the action proceeds). A subclass should also be created to address persons who paid the UUT on per-minute mobile or long distance landline services. Finally, a subclass might address persons who paid the UUT on “bundled services” where local and mobile or long distance services are provided through a plan that does not separately state the charge for the local service.

The Court accordingly finds that an ascertainable class consisting of three subclasses may be defined as follows:

All persons, including individuals, non-corporate entities, and corporations, who have paid the City of Palo Alto Utility Users Tax (“UUT”) imposed by Palo Alto Municipal Code § 2.35.090 on (1) “flat-rate” mobile or separately billed long distance landline telephone service that entitles the subscriber, upon payment of a periodic charge determined as a flat amount or upon the basis of total minutes, to an unlimited number of calls in a specified area, (2) per-minute mobile or long distance landline telephone services, and (3) “bundled” telephone services where local landline and mobile or long distance landline services are provided through a plan that does not separately state the charge for the local service between August 1, 2006 to December 18, 2014. Persons who have paid the UUT only for separately billed local landline telephone services are not included in the class.

There is no dispute that the proposed class is numerous, consisting of “tens of thousands of people” by the City’s admission. (See Opp. at p. 1.)

VI. Predominant Questions of Law and Fact

Regarding predominance,

[t]he ultimate question in every case of this type is whether . . . the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.

(Lockheed Martin Corp. v. Superior Court (Carrillo) (2003) 29 Cal.4th 1096, 1104-1105, quoting Collins v. Rocha (1972) 7 Cal.3d 232, 238.) For example, “if the community of interest is mainly one of law, and if the factual issues requiring separate adjudication are numerous and substantial, a class action does not subserve the judicial process or the litigants.” (Bozaich v. State of California (1973) 32 Cal.App.3d 688, 694-695.) Nevertheless, “[a] class action can be maintained even if each class member must at some point individually show his or her eligibility for recovery or the amount of his or her damages, so long as each class member would not be required to litigate substantial and numerous factually unique questions to determine his or her individual right to recover.” (Acree v. General Motors Acceptance Corp. (2001) 92 Cal.App.4th 385, 397.) Predominance ultimately “hinges on whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment.” (Duran v. U.S. Bank Nat. Assn. (2014) 59 Cal.4th 1, 28, internal citation and quotations omitted.)

Here, common issues predominate with regard to the parties’ legal disputes regarding whether various types of telephone service plans were taxable under the UUT. Any differences between different types of plans in this regard can be addressed through the creation of subclasses, which the Court will certify as an initial matter with regard to key disputes as described above.

The City contends, however, that factual issues concerning what services various carriers actually assessed the UUT on predominate over any common legal questions. It introduces evidence that approximately 300 carriers collected the UUT during the class period, although it concedes that a few large carriers dominate the market. Carriers offered multiple service plans, numbering in the hundreds in total. Carriers themselves, rather than the City, determined how to calculate the UUT for the various services they offered in the various jurisdictions in which they operated, often delegating this task to a third-party service provider. The City argues that individual issues would dominate the Court’s assessment of liability under these circumstances, based on its position that the UUT was properly assessed against local and flat-rate mobile and long distance service. However, the City does not dispute the fundamental premise that the UUT was generally assessed against flat-rate and per-minute mobile and long distance landline services.

Since plaintiff takes the position that the UUT was improperly assessed against all service other than local landline service, she does not focus on whether the specific services on which the UUT was assessed can be determined. Her expert Dr. Fitzsimmons appears to assume that carriers can retrieve any and all customer-level data from databases, but he does not provide adequate foundation for these conclusions and does not address the issue of whether or how the specific services on which the UUT was assessed could be determined. However, plaintiff also provides evidence that itemized, customer-specific bills are widely available from telecommunications providers, and reflect the total UUT billed to each customer in a billing period. The City does not refute this general conclusion, although it submits evidence that the process of producing individual invoices for the entire class period would be burdensome to carriers.

The City’s expert Gary Grace allows that customer invoices generally reflect service-related items “such as a flat-rate charge for the month, charges for minutes used, charges for text messages sent or received, and the like” along with a separate “line item identified as ‘Local Utility Users Tax,’ ‘[City] Local Tax,’ or some similar title, stating the total amount of telephone UUT to be paid for the month covered by the invoice.” (Decl. of Gary Grace ISO Opp., ¶ 29.) Mr. Grace further allows that it is sometimes possible to “back into” a determination of which line items the UUT was applied to by determining the total figure treated as taxable and comparing it to the subtotals of groups of line item charges. (Id. at ¶¶ 40-43.) However, this is not possible in many cases, in which case detailed tax development information must be obtained from the carrier in order to reliably verify how the UUT was calculated. (Id. at ¶ 43.) Reviewing sample invoices from Comcast, Sprint, T-Mobile, and plaintiff’s carrier AT&T, the City’s expert could not determine how the UUT was being calculated in many cases. (Id. at ¶ 44.)

While the evidence shows that the information needed to determine liability is not necessarily available from databases and there may be challenges associated with obtaining it from invoices, this does not compel the conclusion that the class should not be certified. Plaintiff does not need to establish precisely how the UUT was calculated in every case to prove her claims. She need only show that it was improperly assessed against the services that are the subject of her complaint: (1) “flat-rate” wireless or long distance landline services, (2) per-minute wireless or long distance landline services, and/or (3) “bundled” services. The City’s expert does not address the feasibility of these specific determinations. And if plaintiff is correct that it was illegal to impose the UUT on any long distance or mobile service, no matter how that service was billed—in other words, on any service other than traditional local landline service—the analysis should be relatively straightforward. This is a scenario that the City’s expert also does not address. As urged by plaintiff, the Court anticipates that the parties can craft a process by which improper UUT charges imposed on class members can be identified from class members’ billing records, which may be submitted by class members themselves in the event that they are not available from carriers.

Finally, the City contends that its equitable setoff and Government Claims Act defenses also raise individual issues that cannot be managed in a class setting. Regarding equitable setoff, the City asserts that sample invoices suggest that some carriers “may, at some point during the class period, have actually collected less tax than they were required to collect.” (Opp. at p. 23.) The City’s position is that any such undercollected amounts must be deducted from any refunds otherwise owed to class members for improper UUT assessments. The City is correct that it has a right to present affirmative defenses and any individual issues this raises must be adequately managed; however, the Court anticipates that any deductions from refunds otherwise owed can be proven on a group-by-group basis in the event that any undercollection is ultimately shown.

The City’s argument under the Government Claims Act is that any refund owed to class members is limited to the one-year period preceding plaintiff’s presentation of a written claim to the City. Plaintiff contends that such a claim was not required (Complaint, ¶ 35), and this argument can readily be addressed on a classwide basis. If the Court does hold that the one-year limitation would otherwise apply, plaintiff intends to argue that the City should be estopped from asserting this limitation based on representations made to carriers and the public. While plaintiff may or may not be able to prove that estoppel applies on a classwide basis as she hopes, this issue may ultimately never arise, and there is no indication that plaintiff will attempt to prove estoppel on an individual-by-individual basis in the event that her classwide proof fails. Individualized issues with respect to the Government Claims Act accordingly do not preclude certification.

To conclude, “[a] class action can be maintained even if each class member must at some point individually show his or her eligibility for recovery or the amount of his or her damages, so long as each class member would not be required to litigate substantial and numerous factually unique questions to determine his or her individual right to recover.” (Acree v. General Motors Acceptance Corp., supra, 92 Cal.App.4th at p. 397.) Here, plaintiff’s theory of recovery raises many common legal issues and is likely amenable to classwide analysis. (See Duran v. U.S. Bank Nat. Assn., supra, 59 Cal.4th at p. 28.) Plaintiff is not required to present a trial plan at this juncture; however, she continues to bear the burden of proof on her claims and the Court has a continuing responsibility to manage individual issues—including those raised by the defendant—and to decertify the class if they prove unmanageable. (Id. at p. 29.)

V. Adequacy and Typicality

“Adequacy of representation depends on whether the plaintiff’s attorney is qualified to conduct the proposed litigation and the plaintiff’s interests are not antagonistic to the interests of the class.” (McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450.) The fact that a class representative does not personally incur all of the damages suffered by each different class member does not necessarily preclude the representative from providing adequate representation to the class. (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 238.) Only a conflict that goes to the very subject matter of the litigation will defeat a party’s claim of representative status. (Ibid.)

“Although the questions whether a plaintiff has claims typical of the class and will be able to adequately represent the class members are related, they are not synonymous.” (Martinez v. Joe’s Crab Shack Holdings (2014) 231 Cal.App.4th 362, 375.) “The test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.” (Ibid., quoting Seastrom v. Neways, Inc. (2007) 149 Cal.App.4th 1496, 1502.)

The City contends that plaintiff’s claims are not typical of the claims of class members whose telephone service was provided by a different carrier than hers, because the carriers had somewhat different collection practices from one another. However, as already discussed, the precise details of how each carrier computed and collected the UUT are not of great significance here—the issue is whether the UUT was illegally assessed against a few general categories of services. The City concedes that plaintiff paid the UUT on two of these categories: “flat-rate” and per-minute mobile phone service. Her claims are typical of persons in the subclasses corresponding to these services.

While not raised by the City, the Court observes that plaintiff’s claims are not typical of one of the subclasses posited by the Court: persons who paid the UUT on “bundled” services. Particularly given that unique legal arguments and defenses will apply to this subclass, the Court will not certify it absent a class representative who is a member of this subclass. Plaintiff’s motion will accordingly be denied without prejudice as to this portion of the proposed class.

Finally, the City contends that plaintiff’s counsel will not adequately represent the class because, although they are experienced in litigating class actions, they do not have experience with tax litigation specifically. However, counsel has a great deal of experience litigating class actions and complex cases in many different substantive areas. The Court expects that this experience will be pertinent to the vast majority of issues that arise in this litigation, and that counsel can be trusted to seek advice if needed to fill any gaps regarding tax law specifically.

Plaintiff has accordingly established adequacy and typicality as to all portions of the proposed class other than the portion that paid the UUT on “bundled” services.

VI. Superiority

Finally, a class action should not be certified unless substantial benefits accrue both to litigants and the courts. (Basurco v. 21st Century Ins. Co. (2003) 108 Cal.App.4th 110, 120.) The question is whether a class action would be superior to individual lawsuits. (Ibid.) “Thus, even if questions of law or fact predominate, the lack of superiority provides an alternative ground to deny class certification.” (Ibid.) Generally, “a class action is proper where it provides small claimants with a method of obtaining redress and when numerous parties suffer injury of insufficient size to warrant individual action.” (Id. at pp. 120-121, internal quotation marks omitted.)

Here, each class member will have a small claim. Without a class action, it is highly unlikely that any class member would have the incentive to bring a lawsuit. In addition, there are thousands of members of the proposed class. It would be inefficient for the Court to hear and decide the same issues separately and repeatedly for each class member. While the Court appreciates that any recovery in this action will come from public funds and members of the public may have different opinions about the desirability of this outcome, it is not the Court’s role to legislate public policy, and the City cites no authority supporting the proposition that this type of concern should defeat class certification in a case where it is warranted. To conclude, a class action is superior to individual lawsuits under the circumstances.

VII. Conclusion and Order

Plaintiff’s motion for class certification is GRANTED IN PART as to the following class:

All persons, including individuals, non-corporate entities, and corporations, who have paid the City of Palo Alto Utility Users Tax (“UUT”) imposed by Palo Alto Municipal Code § 2.35.090 on (1) “flat-rate” mobile or separately billed long distance landline telephone service that entitles the subscriber, upon payment of a periodic charge determined as a flat amount or upon the basis of total minutes, to an unlimited number of calls in a specified area and/or (2) per-minute mobile or long distance landline telephone services between August 1, 2006 to December 18, 2014. Not included in the class are persons who have paid the UUT only for separately billed local landline telephone services or local landline services “bundled” with mobile or long distance landline services in a plan that does not separately state the charge for the local service.

Persons who paid the UUT on the services described in items (1) and (2) are certified as two subclasses. The motion is otherwise DENIED WITHOUT PREJUDICE.

The parties are directed to meet and confer regarding whether plaintiff will seek to add a class representative to bring claims on behalf of persons who paid the UUT on “bundled” services, as well as regarding a procedure for providing notice to the class and a form of notice. If the parties come to agreement regarding notice, plaintiff shall file a stipulation along with a statement and proposed order pursuant to California Rules of Court, rule 3.766. If there is any dispute regarding these issues, the parties shall advance their next case management conference to a mutually agreeable date so that the issues may be promptly addressed. The parties shall also meet and confer regarding the eventual amendment of the Complaint to conform to the class definition adopted by the Court.

The Court will prepare the order.