Facts

On Dec. 21, 2004, plaintiff Katherine D. Chamberlin bought a video game with an extended warranty from defendant Electronics Boutique, a retailer of video games and equipment. In connection with the purchase, Chamberlin paid California sales tax of 8.5% on both the video game and the extended warranty. Electronics Boutique, in turn, paid the tax collected to the State of California Franchise Tax Board. Plaintiff asserted that the tax on the extended warranty violated California law as an improper tax on services. She notified Electronics Boutique of her claim and demanded that Electronics Boutique reimburse the tax collected to all customers who could be identified, and refrain from charging sales tax on extended warranties. Because Electronics Boutique had paid all taxes collected over to the Franchise Tax Board, and because the tax was not subject to refund, Electronics Boutique denied Chamberlin's demand.

PLAINTIFF'S CONTENTIONS:
Plaintiff Chamberlin brought a class action suit contending that, by charging sales tax on extended warranties, Electronics Boutique had violated the Consumers Legal Remedies Act and had engaged in unlawful, unfair, and fraudulent business practices.

Result

A settlement was reached and approved by the court where Electronics Boutique agreed to extend the term of any extended warranties, service agreements, product replacement plans, game play guaranties or similar plans that were in effect on the day judgment was entered for a period of six months after their expiration date if (i) sales tax was charged on the extended warranty at the time it was purchased and (ii) the purchase was not for an Xbox360, Playstation 3, or Wii. The agreement also provided that Electronics Boutique would conduct an internal review to fix the third-party software used to calculate sales taxes and otherwise to ensure that it collected California sales taxes properly in the future. The class received no cash payment, nor were any coupons or other credits issued to the class. Class counsel received a payment of attorneys fees, costs, and expenses in the sum of $95,000.

Other Information

FILING DATE: Aug. 9, 2005.