A hearing in Orleans Parish Civil District Court that would determine the fate of a possible class action against the City of New Orleans has been continued to April 15.
The lawsuit, brought on by New Orleans residents Jimmie Jackson, Simms Hardin and their business KSD Properties LLC, challenges City Ordinance No. 22207, which imposes penalties and attorney and collection fees on residents who are late paying property taxes.
New Orleans attorney Allain Hardin filed the suit on behalf of KSD in May 2009.
Hardin's firm, Fransen & Hardin APLC, sued the city for the illegal collection of fees in 2008. In that suit, residents were assessed a 3 percent penalty by the city and a 30 percent attorney-collection fee.
In the Fransen & Hardin suit, the Louisiana Supreme Court ruled it unconstitutional for the city to impose and collect the penalties and fees.
As a result of the ruling, New Orleans issued the city ordinance that KSD is now challenging. The new law charged residents a 10 percent penalty on property taxes for late payment as well as a 9.5 percent "attorney/collection fee."
The City of New Orleans is arguing that what they charged residents were taxes and were not unconstitutional.
"The City of New Orleans fee and the outside collectors fee are not penal in nature but are in fact designed to cover the cost of collections from the chronically delinquent taxpayer and hence would not be unconstitutional," city attorneys argued in opposition to the plaintiffs.
The city has filed a motion for peremptory exception of no cause of action, stating that there are no damages at issue because the additional taxes imposed on late payments are not unconstitutional.
The city also filed a motion to transfer and consolidate this case with the Francis & Hardin suit.
Plaintiff attorneys claim that by seeking consolidation, New Orleans "is telling this Court that toes charges imposed by City Ordinance No. 22207 are the same as the Ordinance that was declared unconstitutional (Ordinance No. 18637)."
Consolidating the cases will also create a conflict of interest because the same counsel was being paid attorney/collection fees under both ordinances, the plaintiffs claim. In the Fransen & Hardin case, the city filed a cross claim against its counsel saying it was liable for returning any unconstitutional fees.
"If counsel is going to be consistent, then he will have to file a cross claim over and against his own law firm in this case for the attorney/collection fee his law firm is paid," the plaintiffs argue.
"One could understand that counsel would be hesitant to push any cross claims given that he may be impacting his own pocketbook. Who is going to watch out for the City?"
The firm Linebarger, Goggan, Blair, Pena & Sampson LLP was retained by the city and charges the attorney/collection fee on residents.
New Orleans attorneys Lawrence Jones and Errol Conley are representing the city in this case.
Orleans Parish Judge Herbert Cade will oversee the next hearing in this suit scheduled for April 15.
Orleans Parish Case 2009-05493