Seattle, think tank income tax arguments are “frivolous,” says plaintiff

Seattle, think tank income tax arguments are “frivolous,” says plaintiff
The attorney for one of the plaintiffs in the lawsuit against the city of Seattle’s income tax has filed a motion to sanction both the city and the progressive think tank that intervened in the case for making “frivolous arguments” in court. Whether he is successful or not may depend on the undisclosed findings of a 2015 report to the city council by City Attorney Peter Holmes on the tax’s legality. Photo: societyfortheblind.org.

The plaintiffs challenging the city of Seattle’s income tax have succeeded so far, with a November 22 ruling in King County Superior Court overturning the ordinance. To prevent further appeals that aim to get the issue in front of the State Supreme Court, they now want sanctions imposed on the city and the progressive think tank that helped draft the proposal  and intervened in the case.

Whether the plaintiffs find success in that pursuit may depend on obtaining the contents of a 2015 report provided by the city attorney on the tax’s legality. Throughout the entire legal fight over the income tax, one voice has remained conspicuously absent – that of City Attorney Peter Holmes. Why he’s chosen to play Switzerland is something the plaintiffs challenging the city ordinance want to know, including whether it says something about what the City Council knew when it approved the measure earlier this year.

Meanwhile, newly-elected Seattle Mayor Jenny Durkan plans to push forward with the appeal. When asked in a Facebook live interview with the Seattle Times what she thought of the court ruling, she said: “I think that Judge Ruhl made the decision he made, but we won’t know the final decision on this case until the Supreme Court rules.” She added that the ruling “should be appealed. I think that a Superior Court judge is never really in a position to decide what the law for the whole state should be.”

But the case may never get to the Supreme Court if plaintiff Michael Kunath has his way. In his motion requesting sanctions, attorney Matthew Davis alleges the city engaged in “frivolous conduct,” in part because of the many rationales used by the city’s lawyers during the tax’s November 17 legal hearing.

“By arguing that the Court should ‘do justice’ instead of following the law, the City asked the Court to disregard the law,” the motion states.

The motion also takes aim at the Economic Opportunity Institute (EOI), which was paid $50,000 by the city for consulting work on the tax. After the lawsuit was filed against the city, EOI successfully requested to intervene, claiming it was necessary to protect similar activist work they conduct in other Washington cities.

Their legal argument against the tax centered on the Code Reviser’s title for a 1984 law prohibiting local governments from imposing an income tax, which they claimed violated the state’s single-subject clause for titles. However, Judge John Ruhl concluded that the rule applies to bill titles when it is voted on in session, not the Code Reviser’s title.

Davis says EOI’s misinterpretation of that rule was deliberate.  “EOI built its entire case on the false argument about the {bill) title…even after it knew that it was wrong. That kind of conduct is the very definition of frivolous litigation.”

“The Court should send a signal that even the noblest of causes cannot justify frivolous arguments in litigation,” the motion states further. “The Court should declare EOI’s arguments and the City’s “net income” arguments frivolous and award appropriate terms.”

The question of what the City Council knew, and when it first found out, revolves around a series of events between 2014-15 when the council passed what is called a “statement of legislative intent” for City Attorney Peter Holmes to investigate the legality surrounding a “millionaire excise tax.” That report was provided to the city in April 2015, but according to Davis, “the city has refused to produce it in response to public records requests.”

“Although the contents of the opinion are unknown, efforts to enact an income tax ceased after it was issued,” he wrote.

The council took up the issue again this year, but this time to substantiate the tax’s constitutionality relied on an opinion letter provided to EOI by an activist law firm that had previously represented the think tank during a similar income tax lawsuit in Olympia.

“EOI and its counsel have been advocating for income taxes for a long time,” Davis wrote. “They are dubious sources for an objective opinion.”

Among Davis’ exhibits in his motion is a Seattle Weekly article from September, in which former councilmember Nick Licata is quoted as saying: “whatever we got from the law department, I doubt whether it would be pro income tax…”

Giving credence to that is the fact that Holmes did not sign Seattle’s motion for a summary judgment in the case. Instead, the city hired outside counsel via Pacifica Law Group, LLP.

It’s impossible to know for sure whether Holmes was legally prohibited from defending the tax without viewing the report, Davis wrote. “The City could easily answer that question by providing the memorandum to the Court for in-camera review.” A camera review allows a judge to examine publicly withheld information to determine if the information should be made available.

The motion will be considered by Ruhl on December 6.

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