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Court of Appeal:
Parties Challenging City Fees in Court Need Not First Protest
Opinion Says Trial Judge Erred in Denying Writ of Mandate to Taxpayers Based on Failure to Exhaust Administrative Remedies Where Plaintiffs Are Asserting Constitutional Claims, Not Seeking Refund
By Kimber Cooley, associate editor
Div. Seven of this district’s Court of Appeal has held that Los Angeles Superior Court Judge Curtis A. Kin erred in denying a petition for writ of mandate, filed by taxpayers challenging new trash fees imposed by the City of Azusa that they claim funnel money into the municipality’s general fund in violation of the California Constitution, based on the plaintiffs’ failure to first file a claim for a refund with the tax collector.
Saying that the governing laws requiring taxpayers to exhaust administrative remedies before filing a lawsuit only apply if the plaintiffs are seeking repayment of the fees, the court held that the constitutional challenge underlying the writ petition did not amount to a request to be paid back even if the “practical impact” of the relief sought would result in a “refund to all ratepayers.”
At issue is Article XIII D of the California Constitution, added following voter approval of Proposition 218 in 1996, which provides that revenues from property-related fees “shall not exceed the funds required to provide the property related service” and “shall not be used for any purpose other than that for which the fee or charge was imposed.”
In 2022, the Azusa City Council passed a resolution setting rates for trash collection that include a “franchise fee equal to 10% of the rate for trash service.” Under the adopted scheme, the municipality collects from customers, pays the private waste hauler, and retains the money collected as the “franchise fee.”
Writ Petition
In September 2022, Carlos and Ana Carachure filed a petition for writ of mandate against the city, claiming that the fees violate Article XIII D because the “surcharges…fund transfers to its general fund to pay for general government services unrelated to the provision of solid waste service.” The petitioners paid the fees as billed but did not file a request for a refund.
Instead, they sought a writ directing Azusa to “cease further imposition and collection of excessive solid waste service fees” and to “return all franchise fees transferred from its solid waste service fund…to its general fund during the past three years.” The petitioners also requested a declaration that the “solid waste service fees have violated and continue to violate Proposition 218.”
Kin denied the petition, finding that the Carachures could not challenge the fees until they had exhausted their administrative remedies by “paying under protest” and then seeking a refund.
After the judge denied their motion for a new trial and a request to vacate the judgment, the Carachures appealed.
In Tuesday’s opinion, authored by Acting Presiding Justice John L. Segal and joined in by Justices Gail Ruderman Feuer and Natalie P. Stone, the court reversed the judgment.
Statutory Scheme
The city relies on two statutes for its assertion that the plaintiffs were required to “pay [under protest] first, litigate later.”
Health and Safety Code §5472, provides:
“After fees…are fixed pursuant to this article, any person may pay such fees…under protest and bring an action against the city or city and county in the superior court to recover any money which the legislative body refuses to refund.”
Article 2 of the Revenue and Taxation Code specifies that “[n]o action shall be commenced or maintained under this article…unless a claim for refund has first been filed.”
Segal noted that, as a general rule, a party must exhaust administrative remedies before seeking relief in court, but found that the Carachures’ actions did not run counter to this principle.
He remarked:
“The Carachures paid the sewer and trash fees, but they did not protest. They concede their ‘failure to pay under protest pursuant to section 5472 precludes them from receiving a refund.’…But they argue they did not have to pay under protest before seeking equitable relief to ‘stop the City’s ongoing violations of Proposition 218.’ The Carachures are correct.”
Corrective Action
Azusa asserts that “nothing stopped” the petitioners from raising their constitutional claims and seeking equitable relief through the administrative review process, arguing that “the City could have taken corrective action, including issuing a refund and repealing the offending ordinances.”
Rejecting this argument, Segal wrote:
“The procedure the City suggests might have…‘the salutary effect of conserving judicial resources’ because the ‘challenger and the local agency may resolve the dispute without the challenger having to file an action.’ The issue, however, is not whether the Carachures could have filed an administrative claim seeking equitable relief[,]…the issue is whether the statutory scheme required them to do so before filing this action.”
He continued:
“[T]he plain language of the statutory scheme requires a taxpayer to pay under protest and file a refund claim before filing a superior court action for a refund of sewer or trash fees. It does not require the same of a plaintiff challenging the constitutionality of a city’s general practices for setting and spending such fees.”
He distinguished cases, on which the city relied, in which actions challenging collection fees by local governments were dismissed because the plaintiffs did not pay under protest, pointing out that the decisions involved class actions in which refunds and equitable relief were sought.
Practical Impact
The city asserts that the “practical impact” of the relief the Carachures seek—a writ of mandate directing the city to return all revenue transferred over the past three years to the general fund—amounts to a “refund to all ratepayers.”
Azusa contends that, if the Carachures are successful, the city would be required to decrease fees, which would result in a “refund through reduced rates.”
Unpersuaded, Segal commented:
“Even if the City is correct that success by the Carachures in this action would reduce trash and sewer rates (a speculative assertion), the City provides no authority for its contention an action that results in a rate reduction for all ratepayers in the City is a refund action within the meaning of section 5472 and Article 2. To the contrary, a rate reduction is not a refund.”
The case is Carachure v. City of Azusa, B336778.
Prescott Wayne Littlefield of the Glendale firm Kearney Littlefield LLP and Eric Jon Benink and Vincent David Slavens of the San Diego—based Benink & Slavens LLP acted for the Carachures. Representing the city were Lutfi Z. Kharuf and Dean Seif Atyia of the San Diego office of Best Best & Krieger, and Richard Tait Egger of the Ontario location.
Tuesday’s decision comes on the heels of last week’s move by the Los Angeles City Council to greenlight dramatically raising trash collection fees on residents such that owners of single-family homes and duplexes will be subject to bi-monthly bills of $111.90, reflecting a 54% increase. The vote authorizes the Bureau of Sanitation to update fees for its solid waste services, starting Jan. 1, 2026.
Each unit within smaller apartment buildings, those with three or four residences, will also be required to pay the full $111.90 fee, and rates are anticipated to rise across all categories each year through 2029. City Council members still need to adopt an ordinance to implement the adjustment and cross other legal hurdles before the rate hike is official.
Critics say the move is an attempt to help close a nearly $1 billion budget gap in the city’s finances caused by chronic overspending. Los Angeles officials contend that the proposed changes relate strictly to trash collection, as the municipality has been subsidizing waste removal for years.
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