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Court of Appeal Decides Equitable Tolling Case – Glass & Goldberg | Financing, Property & Bankruptcy Law
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Court of Appeal Decides Equitable Tolling Case

Today’s blog reviews a case where the plaintiffs were time-barred from filing their lawsuit by the statute of limitations, but tried to claim that the filing of a different lawsuit by a third-party satisfied the statute. In Reid v. City of San Diego - filed May 25, 2018, Fourth District, Div. One 2018 S.O.S. 2617, Plaintiffs, Yvonne Reid and Serena Wong, sued the City of San Diego (City) and the San Diego Tourism Marketing District (TMD) in a putative class action complaint, claiming that the defendants were charging “an illegal hotel tax.”

The defendants’ demurred to the complaint, asserting that the defendants lacked standing, and that various causes of action were either barred by res judicata, two statutes of limitations found in the San Diego Municipal Code, or other grounds.

The plaintiffs argued that the validation statutes do not apply because “this action does not involve the issuance of bonds.” Plaintiffs alternatively asserted that any limitation period was equitably tolled during the pendency of a prior lawsuit filed by a third party, San Diegans for Open Government (SDOG), who challenged the renewal assessment as being an unconstitutional tax in violation of a local regulation, Proposition 26.

Plaintiffs asserted they had standing because the assessed hotel owners and operators “simply collect a tax that is imposed upon their hotel guests.”

The court sustained the demurrer to some of the causes of action based on statute of limitations grounds. The defendants’ demurrer to other causes of action was sustained as well based on grounds that the challenged ordinance did not impose or assess a tax and that a public entity may limit approval of an assessment to those who pay for it.

The California Court of Appeal affirmed, agreeing that some of the causes of action were time-barred and the remainder failed to state facts constituting a cause of action. The court found that a limitation period is consistent with due process if it provides a reasonable time to bring the action.

Further, it found that there was no authority that would allow a plaintiff in one case to equitably toll the limitation period based on the filing of a lawsuit by an unrelated third party. In this case, there was no basis for equitable tolling because the plaintiff in the SDOG litigation and the Plaintiffs were different. Plaintiffs cited no authority that would allow a plaintiff in one case to equitably toll the limitation period based on the filing of a stranger’s lawsuit.

Equitable tolling of the statute of limitations has been recognized in California when the following circumstances are present:

  1. the plaintiff is pursuing an alternative remedy in another forum;
  2. under narrow circumstances, while plaintiff is pursuing the same remedy in the same forum;
  3. where a defendant fraudulently conceals the cause of action; and
  4. in certain actions against an insurer.

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