California State Supreme Court allows class-action lawsuits against illegal local taxes

Californians can pursue class-action lawsuits against cities and counties if they were charged an illegal local tax says the state Supreme Court. In Monday’s unanimous decision, justices overturned lower-court rulings requiring taxpayers to file individual claims for refunds.

 

In 2006, Estuardo Ardon sued Los Angeles over a telephone tax, claiming it was a relic of some federal excise tax the courts had already invalidated. Francis Gregorek, attorney for the plaintiff in Ardon vs. Los Angeles said the millions of dollars in damages sought by the suit were for all phone customers the city overcharged. The case has sparked similar challenges in other cities.

 

An appellate court disqualified Ardon’s class-wide standing, saying that a 1992 state Supreme Court ruling, which barred class-action status of a suit that challenged a state tax on vehicles purchased out-of-state, meant that Mr. Ardon could only represent himself.  Justice Ming Chin in Monday’s ruling, however, said that procedures were already on the books for collecting individual refunds of the vehicle tax, thus invalidating class actions for that particular tax. In Ardon’s case, the state high court ruled that, because Los Angeles has no such individual refund procedures in its codes, state law authorizes him to sue on behalf of everyone who paid the tax.

 

Peter Keith, Deputy City Attorney for San Francisco and the lawyer who filed the arguments on behalf of local governments statewide, said that the ruling might have opened Pandora’s box of class-action lawsuits against cities and counties that collect small sums from large groups through third parties such as utilities. Keith reminded the San Francisco Chronicle that his hometown would be largely unaffected by the case since it has ordinances that regulate tax refund claims and prohibit class actions.

 

Ardon’s lawyer, Francis Gregorek, said we can expect a future ruling from the high court on whether or not cities can legislatively shield themselves from class actions.