Union Oil Co. of Cal. v. City of Los Angeles

The City of Los Angeles (hereinafter, the City) appeals from a judgment awarding approximately $3 million (plus interest and attorney fees) in an action brought by Union Oil Company of California (hereinafter, UNOCAL) for a refund of business taxes paid to the City for tax years 1993, 1994 and 1995. Contrary to the City’s contention, as the trial court properly found, the City’s taxing scheme violates state and federal constitutional proscriptions against restraint of commerce with respect to in-city manufacturers selling outside the City. However, UNOCAL is not entitled under 42 United States Code sections 1983 and 1988 to an award of attorney fees incurred in vindicating its rights under the commerce clause of the federal Constitution. (U.S. Const., art. I, § 8, cl. 3.)

Factual and Procedual Summary

The City imposes two alternative taxes upon those engaging in business within its borders. The primary tax is generally referred to as the “business tax,” which is set forth in Los Angeles Municipal Code sections 21.50 through 21.198, and includes a tax on wholesale manufacturing and selling. (L.A. Mun. Code, § 21.166.) A secondary tax, which is an alternative tax to the…