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Tuesday, June 18, 2013
Judge awards firm $1.2 million in fees in
taxation case
Judge rules law firm is entitled to $1.2M following its work on a
dispute involving a Nevada real estate company's California taxes
By Alexandra Schwappach
A judge has ordered the state Franchise Tax Board to pay a law firm $1.2 million in
fees following its work on a dispute over whether a real estate company in Nevada was
subject to taxation in California.
Attorneys from Reed Smith LLP in Los Angeles obtained the award on behalf of
Daniel V Inc., a real estate firm owned by a California resident. The Franchise Tax
Board audited the company in 2000, claiming it owed more than $2.27 million in
California taxes for 1997 and 1998. The company paid those taxes and sued for a
refund.
In April, Los Angeles County Superior Court Judge Mark V. Mooney ruled that the
income at issue was not taxable in California because the company was based in
Nevada and ordered the Franchise Tax Board to refund the $2.27 million. On Friday,
Mooney ruled that Daniel V was also entitled to the $1.2 million in attorney fees and
costs. Daniel V Inc. v. Franchise Tax Board L.A. Superior Court, BC457301 (L.A.
Super. Ct., filed March 14, 2011).
'I hope it discourages [the Franchise Tax
Board] from charging ahead on a weak case in
the future.' - Marty Dakessian
Reed Smith partner Marty Dakessian, who represented Daniel V Inc. owner and
Orange County real estate entrepreneur Ron Lane, said the case might set a practical
precedent for taxpayers who feel they are being abused.
"I'm glad that my client was vindicated after 12 years of doing battle with the
Franchise Tax Board over something that they should have dismissed years ago,"
Dakessian said. "I hope it discourages [the Franchise Tax Board] from charging ahead
on a weak case in the future."
Reed Smith attorneys brought the recent motion for fees under Revenue and
Taxation Code Section 19717, which allows an award when the Franchise Tax Board
takes positions in tax controversies that are not "substantially justified."
Dakessian said the case was particularly troubling because of the extent of litigation.
"The Franchise Tax Board had every conceivable opportunity to correct itself over
the course of the last 12 years and it didn't," he said. "I am very happy for my client
who I feel is an honest and forthright individual."
Tami Grimes, spokeswoman for the Franchise Tax Board, said the agency is
reviewing the decision but cannot comment on pending litigation.
[email protected]
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6/18/2013
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6/18/2013