In a case with important implications for taxing authorities and individuals making tax refund claims, the Second District California Court of Appeal recently held that the Government Claims Act applies to tax refund claims, and that refunds sought in a class action lawsuit may be validated by a single member’s claim. Under this holding, class action certification may be granted without requiring each individual member of the class to first present his or her own separate claim to the public entity. This ruling may have important implications for government agencies handling tax refund claims and for taxpayers who seek refunds of past tax payments.
The case is County of Los Angeles v. Superior Court (Oronoz).[1] After a tax refund claim was presented to Los Angeles County (the “County”), the Plaintiffs filed a lawsuit seeking damages for allegedly illegal utility user taxes. The Plaintiffs claimed that voter approval was required under Propositions 13 and 62, and the tax violated constitutional requirements. The Plaintiffs then consolidated their claims and filed a class action.
Pursuant to the Government Claims Act,[2] prior to failing a lawsuit against a local public entity for money or damages, a person must “present” their claim to the local public entity by filing a written statement of the alleged damages.[3] The County alleged that each individual member of the class had to present their own separate claim for a tax refund before the trial court could certify their class. However, the Court of Appeal rejected the County’s assertions, relying on two key cases in forming its opinion.
First, the Court noted that, in City of San Jose v. Superior Court,[4] the California Supreme Court held that a “claimant” under the Government Claims Act is the class itself rather than its individual members. Thus, the Plaintiffs in the instant case fulfilled the prerequisite to class certification by presenting the collective “class claim” to the County.
Second, the Court of Appeal distinguished Woosley v. California,[5] wherein the California Supreme Court held that claimants could not file a class action lawsuit for a tax refund when the specific statute creating the tax sets forth a particular procedure to petition for a tax refund. The Court of Appeal found that Woosley would not apply in the instant case because Woosley applies only when a separate statute exists which specifically governs specified types of refund claims. No such specific statute applied in the instant case. Consequently, the Court applied the holding from City of San Jose and allowed a class action without individual members of the class presenting separate claims.
This holding has potentially significant implications for government agencies, because issues which give rise to a single individual’s tax refund claim may often extend to others, thereby broadening the potential for “class claims” to related class action lawsuits.
For taxpayers and others with pending claims against public agencies, this holding may make it easier for others to join in the claims, and may simplify the process for seeking legal redress against unlawful government taxation.
If you have questions regarding this issue or other local entity tax issues, contact Matthew Gorman at 562.699.5500.
[1] 2008 DJDAR 1337.
[2] Gov. Code Sections 900 et seq.
[3] The County established its own ordinance governing the claims presentation requirement pursuant to the Government Claims Act. Los Angeles County Code 4.04.010 et seq.
[4] City of San Jose v. Superior Court (1974) 12 Cal. 3d 447.
[5] Woosley v. State of California (1992) 3 Cal. 4th 758.