Friday, April 26, 2013
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S.C. Allows Taxpayer Class Action Against Long Beach
By a MetNews Staff Writer
Long Beach taxpayers may bring a class action against the city for refunds of an allegedly illegal telephone users tax, the California Supreme Court ruled yesterday.
Justice Marvin Baxter, writing for a unanimous court, said the city could not immunize itself against the class-action remedy by enacting an alternative procedure by ordinance.
John McWilliams brought the action in 2006, after complying with the Government Claims Act, claiming that the ordinance originally enacting the tax exempted all charges not subject to the federal excise tax on telephone service. The Internal Revenue Service announced in 2006 that it would no longer collect the tax, following several adverse court decisions, and that persons who paid the tax could claim refunds on their federal tax returns.
The city responded to the IRS ruling by repealing the reference to the excise tax in the ordinance. But McWilliams alleged in his complaint that under Proposition 218, the amended ordinance was illegal because it was not subject to voter approval.
Voters approved, in November 2008, a measure allowing the city to tax all telephone charges. The lawsuit only concerns taxes levied before the measure was approved.
Los Angeles Superior Court Judge Anthony Mohr sustained the city’s demurrer, finding class-wide tax refund claims barred by a 1992 California Supreme Court case. The Court of Appeal stayed action on the plaintiff’s appeal pending the California Supreme Court ruling in Ardon v. City of Los Angeles (2011) 52 Cal.4th 241.
Ardon held that the earlier ruling, Woosley v. State of California (1992) 3 Cal.4th 758, did not categorically bar class claims for tax refunds, but required a determination as to “whether the Legislature contemplated a class claim under the applicable California code.” The justices in Ardon, which also involved a class action seeking refunds of a telephone users tax, said such actions are permitted “in the absence of a specific tax refund procedure set forth in an applicable governing claims statute.”
What Ardon did not decide, Baxter said yesterday, is whether the “applicable...statute” can be a local ordinance. Long Beach argued that it can, and cited its ordinances requiring that tax refunds be sought through a procedure requiring that claims be submitted to the city and approved by the head of the department collecting the tax, the city attorney, or the city council, depending on the size of the claim, or claimed as a credit against future taxes.
Baxter, however, concluded that an ordinance is not a “statute” as far as the Government Claims Act is concerned. He cited Government Code Sec. 811.8, which defines a “statute” as “an act adopted by the Legislature of this State or by the Congress of the United States, or a statewide initiative act.”
The city, he said, did not persuasively argue for a broader construction.
The case was argued in the Supreme Court by Francis M. Gregorek of Wolf Haldenstein Adler Freeman & Herz in San Diego for the plaintiff and Michael G. Colantuono of Colantuono & Levin for the city.
The case is McWilliams v. City of Long Beach, 13 S.O.S. 2026.
Copyright 2013, Metropolitan News Company