Gahanna residents who work in other cities can pursue income tax refunds from the city as a class, which may cost Gahanna millions of dollars, an Ohio appeals court ruled.

The Tenth District Court of Appeals last week affirmed a ruling by the Franklin County Common Pleas Court that allowed Gahanna residents Karla and Douglas LaBorde to bring a class action lawsuit against the city claiming the city misinterprets its tax-sharing statutes and collects too much municipal income tax from those who work and pay taxes elsewhere.

At the trial level, the LaBordes moved to narrow the class to those who filed taxes on or after July 2008, and during court hearings the total potential amount of class members was estimated to be about 12,000. The appeals court narrowed the potential class to those who meet a three-year statute of limitation based on the case’s filing in July 2012, which may change the total amount eligible to seek a refund.

At issue is the Gahanna city law that gives a tax credit on its city income taxes to those who pay income taxes elsewhere. The LaBordes work in Columbus, which has a 2.5 percent income tax while Gahanna has a 1.5 percent income tax. The city grants an 83.3 percent credit on the tax paid in the other municipalities. The LaBordes argued the law is misinterpreted and the city should give them full credit for the amount they paid to Columbus, which would have reduced what they owed Gahanna by several hundred dollars.

The LaBordes also filed a federal lawsuit that was dismissed by the court. In state court, Franklin County Common Pleas Judge Kimberly Cocroft granted summary judgment to the couple on several counts including their entitlement to a refund, and granted class certification to be named as the plaintiffs and have their counsel represent the class of taxpayers.

The city appealed, arguing it was immune from any damages and does not have to pay refunds and that class certification was not proper because the circumstances of those claiming overpayment are too varied to be considered a single unit with similar issues.

Writing for the Tenth District, Judge Gary Tyack noted the city’s claim to political subdivision immunity under R.C. 2744 is inappropriate because the immunity is against civil lawsuit claims for money damages. Judge Tyack explained that not all claims for monetary relief are money damages. The immunity statute protects cities when the claim for damages is “to compensate or substitute for a loss suffered,” but not for relief when someone is seeking reimbursement when overcharged by a government agency.

“In the final analysis, should the LaBordes ultimately succeed on their complaint, the result will be Gahanna paying the LaBordes an award of money, not in the form of money damages but in the form of refunds of overpayment of taxes they paid to Gahanna,” he wrote.

With regard to the class action, Judge Tyack rejected arguments by the city that since class members may have used different calculations and different forms to file their city income taxes, it is too difficult to determine who should be in the class. In response, he wrote all the LaBordes and others have to do is show they reside in Gahanna and work in municipalities with income tax rates higher than Gahanna’s 1.5 percent, and that they filed their taxes using the calculations Gahanna instructed them to use.

Judge Tyack noted the trial court ascertained from a representative of the Regional Income Tax Agency the names, addresses, wages, and earnings of about 12,000 residents who fit into the same category as the LaBordes. He ruled that if the taxpayers are not represented as a class, it is unlikely many would file new lawsuits given the relatively small amounts of money each may receive compared to the time and expense of a lawsuit.

The court remanded the case to the trial court for further proceedings.

Judges Susan Brown and Timothy S. Horton concurred in the decision.

LaBorde v. Gahanna, 2015-Ohio-2047
http://www.supremecourt.ohio.gov/rod/docs/pdf/10/2015/2015-Ohio-2047.pdf
Civil Appeal From: Franklin County Common Pleas
Judgment Appealed From Is: Affirmed in part and Reversed in part
Date of Judgment Entry on Appeal: May 28, 2015

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