1

Filed 7/25/11



## IN THE SUPREME COURT OF CALIFORNIA

ESTUARDO ARDON, ) ) S174507 Plaintiff and Appellant, ) ) Ct.App. 2/3 B201035

v. ) ) Los Angeles County CITY OF LOS ANGELES, ) Super. Ct. No. BC363959 ) Defendant and Respondent. )

________________________________ ___ )

In this case, we must decide whether Government Code section 910 (section 910) 1 allows taxpaye rs to file a class action claim against a municipal governmental entity for
the refund of local taxes. In City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 455 ( City of San Jose ), we held that section 910 permits a litigant to bring a class claim

a gainst a local government. We later held in Woosley v. State of California (1992) 3 Cal.4th 758, 792 ( Woosley ), however, that class claims to recover tax refunds are not permitted in certain situations because article XIII, section 32 of the California
Co nstitution prevents the judiciary “from expanding the methods for seeking tax refunds expressly provided by the Legislature.” As we explain, neither Woosley , which concerned the interpretation of statutes other than section 910, nor article XIII, section 32 of the California Constitution, applies to our determination of whether section 910 permits class claims that seek the refund of local taxes. We therefore conclude that the reasoning of City of San Jose , which permitted a class claim against a municipa l

1 All statutory references are to the Government Code unless otherwise noted.2

government in the context of an action for nuisance under section 910, also permits taxpayers to file a class claim seeking the refund of local taxes under the same statute.

FACTS AND PROCEDURAL BACKGROUND Plaintiff Estuardo Ardon (Ardon) is a resident of defendant City of Los Angeles (City). In October 2006, Ardon filed a class action lawsuit on behalf of himself and similarly situated individuals challenging the City‟s telephone users tax (TUT) and seeking refund of funds collected under the TUT over the previous two years. Ardon asserted that the City‟s municipal code exempts all amounts paid for telephone service from the TUT to the extent that those amounts are also exempt from the federal excise tax (FET). Ardon contends that since the FET was im properly collected, so too was the TUT. In December 2006, Ardon received a notice from the Los Angeles City Attorney rejecting his attempt to present a tax refund claim on behalf of a class due to lack of legal standing. Ardon‟s complaint against the Cit y sought, inter alia, injunctive and declaratory relief to prevent continued unlawful collection of the TUT, declaratory relief alleging the unconstitutional amendment of the TUT by the Los Angeles City Council, 2 money had and received in unjust enrichment , and violation of the due process clauses of the Fourteenth and Fifth Amendments to the United States Constitution. The complaint sought certain remedies, including certification as a class action, an accounting of the TUT funds collected by the City, an d return of money wrongfully taxed.

2 Subsequent to Ardon‟s filing his complaint, the City amended Los Angeles Municipal Code section 21.1.3 to remove all references to the FET. The city council passed the amendment to the ordinance on January 9, 2007. (L.A. Ord. No. 178,219.) In the Court of Appeal, the City con tended that Ardon must file the refund claim under Los Angeles Municipal Code section 21.07 and former section 21.1.2 governing claims for refund of overpayment of business or use taxes. As the court observed, however, those code sections do not apply to Ardon‟s claim that the City‟s TUT was an illegal tax. The City does not renew its claim here. Therefore, we do not address any issues involving preemption of the municipal code provisions in this case.3

The City demurred to Ardon‟s complaint and moved to strike all class action allegations on the grounds that Woosley prohibited Ardon from filing a claim against the City for the refund of taxes on behalf of a putative c lass. Instead, the City argued, each
member of the alleged class must file a government claim with the City before Ardon could proceed with a class action lawsuit. The superior court granted the City‟s motion to strike all class allegations. It also par tially overruled and partially sustained the demurrer without leave to amend, and stayed other causes of action. Ardon filed a timely appeal from the interlocutory order striking the class allegations. A divided Court of Appeal affirmed the trial court‟s order refusing to certify the class. In so doing, the panel specifically rejected its own reasoning and contrary holding in a factually similar case, County of Los Angeles v. Superior Court (2008) 159 Cal.App.4th 353 ( Oronoz ) . The Court of Appeal disse nt would have followed the opinion in Oronoz , which held that under City of San Jose’ s construction of section 910, a “claimant” could be an entire class as well as an individual. ( Oronoz , supra , at p. 367.) We granted review to resolve the conflict in t he appellate courts regarding permissible
class claims under section 910.
DISCUSSION Before 1959, taxpayer and other claims against the state, local, and municipal governments were governed by myriad state statutes and local ordinances. Finding this syste m too complex, the Legislature enacted the Government Claims Act (the Act), which established a standardized procedure for bringing claims against local governmental entities. (Stats. 1959, ch. 1724, p. 4133, enacting former Gov. Code, § 700 et seq. [repl acing more than 150 separate procedures for directing claims against local governmental entities]; now § 900 et seq.) 3

3 Section 910 states: “A claim shall be presented b y the claimant or by a person acting on his or her behalf and shall show all of the following: [¶] (a) The name and post office address of the claimant. [¶] (b) The post office address to which the person presenting the claim desires notices to be sent. [¶ ] (c) The date, place and other circumstances of the occurrence or transaction which gave rise to the claim asserted. [¶]4

Section 910 does not specifically apply to tax refunds, but to all claims against governmental entities. (See City of San Jose , sup ra , 12 Cal.3d at p. 454.) The purpose of the claims statutes “is to provide the public entity sufficient information to enable it to adequately investigate claims and to settle them, if appropriate, without the expense of litigation.” ( Id. at p. 455.) A s originally proposed, the standardized procedures of the Act embodied in section 910 would not have applied to “[c]laims under the Revenue and
Taxation Code or other provisions of law prescribing procedures for the refund . . . of any tax . . . .” (Recom mendation and Study Relating to the Presentation of Claims Against Public Entities (Jan. 1959) 2 Cal. Law Revision Com. Rep. (1959) p. A

- 12 (proposed former § 703, subd. (a), italics added.) However, the Legislature specifically rejected this proposal an d instead enacted former section 703, subdivision (a) (now § 905, subd. (a)), which exempted from section 910 “[c]laims under the Revenue and Taxation Code or
other statute prescribing procedures for the refund . . . of any tax . . . .” (Stats. 1959, ch.

1 724, pp. 4133

- 4134, italics added.)
The issue in City of San Jose was whether a class claim could satisfy the claim requirements of section 910, or whether such class action claims could not be maintained against governmental entities. ( City of San Jose , supra , 12 Cal.3d at p. 455.) The plaintiffs had filed a class claim against the City of San Jose under section 910, alleging that aircraft noise, dust, vapors, and vibration arising from operations at the San Jose Municipal Airport were a nuisance and d iminished the market value of their property. ( City of San Jose , at pp. 453, 455.) This court adopted a two

- part test for determining whether the claim satisfied section 910: “Is there some compliance with all of the

(d) A general description of the indebtedness, obligation, injury, damage or loss incurred so far as it may be known at the time of pr esentation of the claim. [¶] (e) The name or names of the public employee or employees causing the injury, damage, or loss, if known. [¶] (f) The amount claimed if it totals less than ten thousand dollars ($ 10,000) as of the date of presentation of the cl aim . . . together with the basis of computation of the amount claimed. If the amount claimed exceeds ten thousand dollars ($10,000), no dollar amount shall be included in the claim. However, it shall indicate whether the claim would be a limited civil ca se.”5

statutory requirements; and, if so, is this compliance sufficient to constitute substantial compliance?” ( City of San Jose , at pp. 456

- 457.) In addressing the section 910 class claim, City of San Jose concluded that the word “claimant” referred to “the class itself,” not to an individual class member. The court “reject[ed] the suggested necessity for filing an individual claim for each member of the purported class.” ( City of San Jose , supra , 12 Cal.3d at p. 457.) The court reasoned that “[t]o require such detailed information in advanc e of the complaint would severely restrict the maintenance of appropriate class actions

— contrary to recognized policy favoring them.” ( Ibid. ; see Code Civ. Proc., § 382; see also Vasquez v. Superior Court (1971) 4 Cal.3d 800.) The court did not believe t hat section 910 was “intended to thwart class relief.” ( City of San Jose , supra , 12 Cal.3d at p. 457.) Because satisfaction of section 910‟s procedural requirements obliged a representative class plaintiff to supply information detailing his or her name, address, and other specified information, any information beyond this requirement to identify the class itself was sufficient to satisfy the “ „some compliance‟ test.” ( City of San Jose , supra , 12 Cal.3d at p. 457.) “Beyond this, the sufficiency of the identifying information must be measured by the substantial compliance test.” ( Ibid. ) A claim substantially complies with a claims statute if the parties have stated sufficient information “to reasonably enable the public entity to make an adequate inves tigation of the merits of the claim and to settle it without the expense of a lawsuit.” ( Id . at p. 456.) Woosley was a constitutional challenge to the state‟s vehicle license fees and use taxes imposed on passenger vehicles sold outside California. The n umerous issues included the question of whether the trial court had erred in certifying the claim as a class
claim. Woosley held that article XIII section 32 of the California Constitution compelled an action for tax refunds against the state to be brough t in the manner that the Legislature specified under the statutes at issue. ( Woosley , supra , 3 Cal.4th at p. 789.) 4 The court

4 Article XIII, section 32 of the California Constitution reads, “No legal or equitable process shall issue in any proceeding in any court against this State or any officer thereof6

concluded that statutes dictating the procedural requirements for obtaining refunds of
vehicle license fees and use taxes did no t authorize class action claims. ( Woosley , at p. 788; see Veh. Code, § 42231; Rev. & Tax. Code, §§ 6901 et seq., 6486.) Rather, the language of those statutes indicated that “a claim for a refund of vehicle license fees must be filed by „ the person who h as paid the erroneous or excessive fee or penalty, or his agent on his behalf. ‟ . . . [T]he term „person‟ does not include a class, and a class representative who files a claim on behalf of all others similarly situated, without the knowledge or consent o f such other persons, is not the agent of the members of the class.” ( Woosley , supra , at p. 790, quoting Veh. Code, § 42231.) Because article XIII, section 32 of the California Constitution requires tax refund claims to be made in the specific manner pre scribed by the Legislature, we concluded that the particular statutes at
issue in Woosley did not authorize class claims. Regarding class

- based refunds for use taxes, Woosley observed that “[a]n examination of the entire statutory scheme that governed requ ests for refunds of sales and use taxes when Woosley's claim was filed in 1977 reveals . . . that class claims were not contemplated. If the [State Board of Equalization] denied a claim, that entity was required, within 30 days, to „serve notice of its ac tion on the claimant in the manner prescribed for service of notice of a deficiency determination.‟ ([Rev. & Tax. Code,] § 6906.) [Revenue and Taxation Code] [s]ection 6486, in turn, provided in 1977 that the [State Board of Equalization] shall give writt en notice of a deficiency determination „to the retailer or person storing, using, or consuming tangible personal property,‟ either by mail or by „delivering it to the person to be served.‟ The language of section 6486 suggests that notice must be given to each individual taxpayer. No mention is made of notice to a class representative. The requirement that notice of the denial of a claim must be given to each individual taxpayer thus is inconsistent with the use of a class claim.”

to prevent or enjoin the collection of any tax. After payment of a ta x claimed to be illegal, an action may be maintained to recover the tax paid, with interest, in such manner as may be provided by the Legislature.”7

( Woosley , supra , 3 Cal .4th at pp. 790

- 791.) Woosley, therefore, addressed the limited question of whether Vehicle Code section 42231 and Revenue and Taxation Code sections 6901 et seq. and 6486 permitted class actions by citizens seeking refunds of
taxes and fees from the stat e . When construed in light of article XIII, section 32 of the California Constitution, we concluded that the Legislature did not intend to authorize
class claims for the refund of fees and taxes under those particular statutes . ( Woosley , at pp. 789

- 792.) Woosley also stated that “the holding in City of San Jose . . . should not be extended to include claims for tax refunds.” ( Woosley , supra , 3 Cal.4th at p. 789.) However, we did not mean that City of San Jose forbids all class action claims for tax
refu nds; rather, Woosley precluded class claims for tax refunds where the Legislature has explicitly set forth procedures for obtaining those refunds and has refused to authorize class claims under those procedures. Specifically, Woosley criticized “[s]everal decisions of the Court of Appeal [that] extended the holding in City of San Jose to permit the filing of class claims seeking tax refunds, reasoning by analogy to the claims statute construed
in City of San Jose that the existing tax

- refund statutes could and should be interpreted to authorize the filing of class claims.” ( Id. at p. 788, italics added.) It is important to note
that none of the Court of Appeal decisions this court criticized in Woosley either construed or applied section 910. (See Schode rbek v. Carlson (1980) 113 Cal.App.3d 1029, 1033 [property tax statute]; Lattin v. Franchise Tax Board (1977) 75 Cal.App.3d 377, 381 [income tax statute]; Santa Barbara Optical Co. v. State Bd. of Equalization (1975) 47 Cal.App.3d 244, 249 [sales tax statu te]; Javor v. State Bd. of Equalization (1977) 73 Cal.App.3d 939, 948 [sales tax statute].)
Several cases decided after Woosley have concluded that article XIII, section 32 of
the California Constitution bars class claims and class actions for the refund o f locally adopted taxes absent specific state statutory authority. (See Batt v. City and County of

San Francisco (2007) 155 Cal.App.4th 65, 74

- 75 [sustaining demurrer to plaintiff‟s class action challenging city‟s transient occupancy hotel tax]; Howard Ja rvis Taxpayers Assn.8

v. City of Los Angeles (2000) 79 Cal.App.4th 242, 249 [rejecting taxpayer suit challenging a municipal home occupation ordinance]; Neecke v. City of Mill Valley (1995) 39 Cal.App.4th 946, 961

- 962 [rejecting property owner‟s action chal lenging a city property tax].) As Oronoz observed, however, these cases are distinguishable, because they all considered statutes or municipal ordinances enacted to provide specific procedures for filing tax claims against governmental entities

— procedur es that are not applicable or required in this case. ( Oronoz , supra , 159 Cal.App.4th at p. 365, fn. 9.) In addition, like the Oronoz court, we specifically disagree with the overbroad statement in Howard Jarvis Taxpayers Assn. that “class

- action

- type law suits seeking a refund of fees and taxes are barred unless each plaintiff has first filed an administrative refund claim with the City.” ( Id. at p. 249.) The statement is especially incorrect “as applied to claims against local public entities that are n ot governed by specific tax refund statutes.” ( Oronoz , supra , at p. 365, fn. 9.) The Court of Appeal here determined that the applicable claims statute in the present case is Government Code section 910. Ardon asserts that section 910 claims against go vernment entities are to be presented by the claimant or by a person acting on his or her behalf and that, as noted above, in City of San Jose this court held that the word “claimant” in section 910 must be equated with the class itself and therefore permi ts the filing of class claims. Ardon also claims that the Court of Appeal improperly extended the reach of article XIII, section 32 of the California Constitution “beyond state entities and their agents to a local government.” By contrast, the City asse rts that equating the term “claimant” with “the class itself” is inconsistent with the strict compliance standard set forth in Woosley , supra , 3 Cal.4th 758, for tax refund claims. But, as Ardon observes, Woosley does not require strict compliance with cl aims statutes in tax refund cases. The case requires that a court analyze the claims statutes before it to determine whether the Legislature intended to allow class claims under those statutes. Here, as City of San Jose , supra , 12 Cal.3d 447, held, a cla ss claim by taxpayers for a tax refund against a local governmental entity is9

permissible under section 910 in the absence of a specific tax refund procedure set forth in an applicable governing claims statute. Contrary to the City‟s argument, Woosley
sim ply does not apply here because section 910 allows the class claim. Our conclusion recognizes the limitations of both City of San Jose and Woosley in addressing the availability of class claims for the tax refunds in this case. City of San

Jose simply h eld that section 910 does not preclude class claims against government entities. ( City of San Jose , supra , 12 Cal.3d at pp. 456

- 457.) The action there did not involve a challenge to a local tax, but instead asserted nuisance and inverse condemnation
clai ms. ( Ibid. ) All that Woosley demands is that a court first examine the claims statutes at issue in a claim for a taxpayer refund to determine whether the Legislature contemplated a class claim under the applicable California code. ( Woosley , supra , 3
Cal .4th at pp. 790

- 792.) The court did not analyze the applicability of section 910, and, in contrast to the City‟s contention, there is no reason to construe section 910 in light of Woosley . As we have discussed, the relevant governing claims statute here is section
910. In contrast to the two statutes at issue in Woosley, section 910 states specifically that a “claim shall be presented by the claimant or by a person acting on his or her behalf.” While the Act contains an exemption for “[c]laims under the Revenue and
Taxation Code or other statute prescribing procedures for the refund . . . of any tax,” the claim here did not involve any applicable municipal code or statute governing claims for
refunds. (Gov. Code, § 905, subd. (a), italics added.) City of San Jose held that class claims are permitted under section 910. ( City of San Jose , supra , 159 Cal.App.4th at p. 367.) Therefore, class claims for taxpayer refunds against local governmental entities brought under section 910 are also permitted in Cal ifornia. In addition, the City contends that article XIII, section 32 of the California Constitution mandates that the Legislature must expressly authorize actions for tax refunds, and section 910 does not expressly authorize class claims. Article XIII, s ection 32 of the California Constitution states, “No legal or equitable process shall issue in any proceeding in any court against this State or any officer thereof to prevent or enjoin the10

collection of any tax. After payment of a tax claimed to be illeg al, an action may be maintained to recover the tax paid, with interest, in such manner as may be provided by the Legislature.” Despite the first sentence‟s reference to tax actions against the state, the City asks us to read the second sentence of article XIII, section 32 to also preclude tax actions against local governments in the absence of express legislative authorization. But even assuming article XIII, section 32 is equally applicable to tax actions against local governments, we have already deter mined that section 910 provides the necessary legislative authorization for class claims of taxpayer refunds against local governmental entities. Indeed, there is nothing in the constitutional provision that would preclude the present action. The City fur ther asserts that the public policy underlying article XIII, section 32 precludes the present action. In Woosley , we held that article XIII, section 32 “rests on the premise that strict legislative control over the manner in which tax refunds may be sough t is necessary so that governmental entities may engage in fiscal planning based on expected tax revenues. [Citation.]” ( Woosley , supra , 3 Cal.4th at p. 789.) The City argues that this policy is thwarted where the local government is faced with a potenti ally huge liability in the form of a class action. But article XIII, section 32 simply prohibits courts from “prevent[ing] or enjoin[ing] the collection of any tax” during the pendency of litigation challenging the tax . (Cal. Const., art. XIII, § 32.) I n fact, article XIII, section 32 does not purport to limit a court‟s authority to fashion a remedy if it determines a tax is illegal, including its authority to issue an injunction against further collection of the challenged tax. As Ardon observes, we ha ve held that the important public policy behind article XIII, section 32 “ „is to allow revenue collection to continue during litigation so that essential public services dependent on the funds are not unnecessarily interrupted.‟ ” ( State Bd. of Equalizat ion v. Superior Court (1985) 39 Cal.3d 633, 638, quoting Pacific Gas & Electric Co. v. State Bd. of Equalization (1980) 27 Cal.3d 277, 283.) This policy is intended to ensure the uninterrupted flow of tax revenue, so that refunds that are
authorized must be processed in orderly procedures that the Legislature allows. That11

policy favoring fiscal responsibility, however, does not justify precluding legitimate class proceedings for the refund of allegedly illegal taxes, and is indeed satisfied here because

s ection 910 allows the present taxpayer class claim.
CONCLUSION Woosley , supra , 3 Cal.4th 758, does not apply to a potential taxpayer class claim brought under section 910. In addition, neither the explicit language nor the policy underlying article XIII, section 32 applies to prevent the present action. City of San Jose , supra , 12 Cal.3d 447, is entirely consistent with our conclusion here. Class claims for tax refunds against a local governmental entity are permissible under section 910 in the
absence o f a specific tax refund procedure set forth in an applicable governing claims statute. Consequently, we reverse the Court of Appeal judgment, and remand the matter for further proceedings consistent with our opinion.

CHIN, J. WE CONCUR:

CANTIL

- SAK AUYE, C. J. KENNARD, J. BAXTER, J. WERDEGAR, J. CORRIGAN, J. JACKSON, J.*

_____________________________ * Associate Justice of the Court of Appeal, Second Appellate District, Division Seven, assigned by the Chief Justice pursuant to article V I, section 6 of the California Constitution.See last page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Ardon v. City of Los Angeles

__________________________________________________________________________ ________ Unpublished Opinion Original Appeal Original Proceeding Review Granted XXX 174 Cal.App.4th 369 Rehearing Granted

__________________________________________________________________________________ Opinion No. S174507 Date Filed: July 25, 2011

__ ________________________________________________________________________________ Court: Superior County: Los Angeles Judge: Anthony J. Mohr

__________________________________________________________________________________ Counsel:

Wolf Haldenstein Adl er Freeman & Herz, Francis M. Gregorek, Rachele R. Rickert; Cuneo Gilbert & LaDuca, Jon Tostrud; Chimicles & Tikellis, Nicholas E. Chimicles and Timothy N. Mathews for Plaintiff and Appellant. Wolf, Haldenstein Adler Freeman & Herz, Francis M. Gregorek, R achele R. Rickert; Cuneo Gilbert & LaDuca, Jon Tostrud; Chimicles & Tikellis and Timothy N. Mathews for Willy Granados and Jon W. McWilliams as Amici Curiae on behalf of Plaintiff and Appellant. Patricia Sturdevant; Wilentz, Goldman & Spitzer, Kevin P. Ro ddy; and Timothy Bittle for NASCAT, Howard Jarvis Taxpayers Association, Consumer Federation of California and Utility Reform Network as Amici Curiae on behalf of Plaintiff and Appellant. Patricia Sturdevant; Richard Holober; Shepherd, Finkelman, Miller & Shah, Patrick A. Klingman; Huskinson, Brown, Heidenreich & Carlin and Paul E. Heidenreich for Consumer Action, Consumer Federation of California and NASCAT as Amici Curiae on behalf of Plaintiff and Appellant. Edward M. Teyssier; and Joseph D. Henchman f or the Tax Foundation as Amicus Curiae on behalf of Plaintiff and Appellant. Alan M. Mansfield for Utility Consumers‟ Action Network as Amicus Curiae on behalf of Plaintiff and Appellant.
Rockard J. Delgadillo and Carmen Trutanich, City Attorneys, Noreen S. Vincent and Michael Nagle, Assistant City Attorneys, Brian I. Cheng, Deputy City Attorney; Orrick Herrington & Sutcliffe, William Molinski, Valerie M. Goo and Frank D. Rorie; Colantuono & Levin, Michael G. Colantuono, Sandra J. Levin, Amy C. Sparrow an d Erwin M. Benedicto for Defendant Respondent.Page 2

– S174307

– counsel continued

Dennis J. Herrera, City Attorney (San Francisco), Julie Van Nostern, Chief Tax Attorney, and Peter J. Keith, Deputy City Attorney, for The League of California Citie s, The California State Association of Counties and The California Special Districts Association as Amici Curiae on behalf of Defendant and Respondent.

Raymond G. Fortner, Jr., County Counsel (Los Angeles) and Albert Ramseyer, Principal Deputy County Cou nsel, for the County of Los Angeles as Amicus Curiae on behalf of Defendant and Respondent.Counsel who argued in Supreme Court (not intended for publication with opinion):

Francis M. Gregorek Wolf Haldenstein Adler Freeman & Herz 750 B Street, Suit e 2770 San Diego, CA 92101 (619) 239

- 4599

Sandra J. Levin Colantuono & Levin 300 South Grand Avenue, Suite 2700 Los Angeles, CA 90071 (213) 542

- 5700