al. v. Director, Div. of Taxation, et al., Docket No. 009529-2011, 000622-2011, 007022-2011, 007023-2011,
007024-2011, 007025-2011, 007027-2011, 007052-2011 (Consolidated), Tax Ct. (Hon. Patrick DeAlmeida, P.J.T.C.)
The firm represented the plaintiff
taxpayers in the above consolidated lawsuits. On November 3, 2017, a Judgment
was entered whereby the Court approved a settlement that ended the lawsuit. The
Plaintiffs recovered a total of $13,000,410. as a result of the lawsuit and the
In March 2009, the
plaintiffs shared the prize in a Mega Millions lottery contest. At the date of
the contest, the New Jersey Gross Income Tax law specifically exempted lottery
winnings from New Jersey taxes. However, in June 2009, the New Jersey
Legislature amended the Gross Income Tax law and, for the first time, imposed
the New Jersey tax upon lottery winnings in excess of $10,000. The Legislature
declared that the new tax would be applied retroactively to January 1, which brought
Plaintiffs’ winnings under the umbrella of the new tax.
Plaintiffs filed tax
returns for the tax year 2009 and, to avoid potential penalties and interest,
paid the gross income tax. Plaintiffs then filed amended tax returns, excluding
the lottery winnings from income, and they sought a refund of the taxes already
paid. The Division of Taxation denied the refund requests.
The Plaintiffs then filed
the lawsuit, seeking a refund, arguing that the retroactive application of the
tax law to their lottery winnings violated due process, the manifest injustice
doctrine, the square corners doctrine and was a breach of their contract with
the Division of Lottery.
The court granted
partial summary judgment in favor of plaintiffs based upon the square corners doctrine,
ruling that the Plaintiffs were entitled to a refund of the taxes paid on their
lottery winnings, with interest.
Prior to a trial on Plaintiffs’ manifest
injustice claim, the parties settled the lawsuit, whereby the parties agreed
that the Plaintiffs were entitled to the full refund with interest, totaling
The lawsuit was
litigated by William D. Grand, a partner at the firm, and Steven Gladis, an