In November, the Tax Foundation filed an amicus curiae ("friend of the court") brief in the California Court of Appeal, in the case of Ardon v. City of Los Angeles. The case involves a challenged telephone excise tax, and the question of whether a class action lawsuit can be permitted. Class action lawsuits are useful in that they combine all who paid the tax into one comprehensive legal case, ensuring that the city must refund illegally collected taxes to all who paid them.
While class actions are permitted for state tax claims in California, Los Angeles argues they are not allowed for local taxes. Instead, they contend, each individual taxpayer must submit his or her own refund claim for processing, administrative hearings, and litigation. The Tax Foundation brief noted that prior cases permitted class actions for tax refunds, although the California Supreme Court has limited them for state taxes.
In an opinion filed yesterday, the California Court of Appeal ruled 2-1 that Ardon cannot bring a class action lawsuit. 2009 WL 1479168. The court relied on a case (Woosley) that disallowed class actions for state tax refunds if the statute did not specifically authorize them. The court reasoned that the rule should apply to local tax refunds, even if they are silent on the issue of class actions. The court emphasized that interrupting revenue collections is dangerous. A prior case that conflicts with this new ruling was overruled.
Judge H. Walter Croskey dissented, arguing that Woosley was a result of state taxes where the legislature outlined a different refund process other than class actions. Because the tax in question was locally enacted and had no refund procedure other than individual claims, he would apply existing precedent and permit the class action. Croskey's arguments mirror those included in the Tax Foundation's brief.
Judge Joan Klein wrote a brief concurrence explaining why she changed her vote from previous cases, and urging the California Supreme Court to review the case.
