Highway One suit against Dewey dismissed

Passage of HB333 renders suit unnecessary
August 22, 2014
The Alex Pires-owned Highway One has voluntarily dismissed a lawsuit against Dewey Beach that challenges the legality of the town's business license fee. The case was officially dismissed Aug. 19. SOURCE FILE PHOTO

A lawsuit filed by the Dewey Beach-based Highway One challenging the legality of Dewey Beach's businesses license fee has been voluntarily dismissed.

The dismissal was filed Aug. 19 by the company's attorney Stephen Spence and then approved by the Delaware Supreme Court.

Highway One, owned by Alex Pires, filed the suit in February 2013 in Chancery Court, claiming the town has no authority to collect the fee, which the suit said is a tax.

The lawsuit was dismissed after a December 2013 ruling by Vice Chancellor Sam Glasscock in favor of the town, but Highway One appealed to the Delaware Supreme Court in January. The case had been slowly moving through the court process since.

Dewey Beach Town Manager Marc Appelbaum said the town obviously had no objection to dismissing the suit.

“The town is thrilled the case is being dismissed,” he said. “Lets all stop paying the lawyers.”

Passage of HB333 protects Highway One

Appelbaum wasn't sure why Pires decided to drop the suit, but he speculated it had something to do with the passing of House Bill 333 by the General Assembly during the 2014 legislative session.

The bill was introduced by Speaker of the House Rep. Pete Schwartzkopf, D-Rehoboth Beach, in response to the Chancery Court decision. The bill's synopsis says the court's opinion has limited the Delaware Constitution by allowing a municipality to impose a tax through an “all powers” clause in a municipal charter even if there is no specific authorization by an act of the General Assembly to impose such a tax.

HB333 clarifies that municipalities cannot impose, levy, assess or collect a tax of any kind without Delaware General Assembly approval.

The bill does not include any taxes in existence prior to June 15, 2014, and any municipal corporation that obtained a home rule charter prior to June 1, 1966.

Appelbaum said because of this bill, Pires is protected from the town creating a gross receipts tax with out it first being approved by the General Assembly. The town proposed a gross receipts tax in November 2012 on businesses that make more than $200,000 annually, but ultimately decided against it.

The short story is, the town won the lawsuit, Appelbaum said, but Alex also won because now he is protected.

When asked why the suit was dropped and whether HB333 played any role in the decision, Pires said he had no comment.

DBP’s five-year offer

The dismissal of the lawsuit could mean the resurrection of discussions among town officials and the Dewey Business Partnership regarding an alternative to the gross receipts tax.

After voting against the gross receipts tax, the commissioners tasked the business community to come up with another idea. In February, the partnership presented a proposal to pay the town $50,000 annually for five years.

In March, council decided to delay action on the proposal in light of the ongoing lawsuit with Highway One.

The partnership requested a decision on the offer by April 14 and then rescinded it on May 14.

Appelbaum, who described his relationship with the business community as healthy, said if the opportunity to work with the town's businesses presents itself, he would take it.

“I'm always willing to talk and listen to find solutions with problems we might have,” he said.

Steve Montgomery, Starboard owner and president of the Dewey Business Partnership, said he is willing to participate in any agreement between the town and the businesses, but he would not be taking the lead on the discussions this time around.

“I worked very hard last year at this time to pull that [proposal] together and spent adequate personal finances to offer a complete, professional proposal,” he said in an email. “Therefore I will not take the lead in any future discussions, but will always contribute and participate in any actions that help to make Dewey Beach a better the end of the day, any of us in the business community will do whatever is asked of us to support those departments.”

Appelbaum said as soon as Labor Day is over, he would approach the business community to resume discussions.