Court Opinion

ID: 9660159
Source: CourtListenerOpinion
Date Created: 2023-08-23 22:06:46.529087+00
Date Added: 2024-06-11T18:14:16.084339
License: Public Domain

ROBERT L. Brown, Justice, dissenting. The legacy of this opinion is to deny Arkansas taxpayers who have paid $20, $30, $50, or $100 in illegally assessed taxes a remedy for recouping those taxes. This is unjust and unfair in the extreme. Until today a remedy was recognized. See Pledger v. Bosnick, 306 Ark. 45, 811 S.W.2d 286 (1991). Now the majority of this court closes that door and effectively locks these people out of court and divests them of any practical legal recourse. I would deny rehearing and affirm our decision in State v. Staton, 325 Ark. 341, 925 S.W.2d 418 (1996) (Staton I). The majority decides as it does for two primary reasons: (1) an immutable and unshakable conviction that sovereign immunity allows the Department of Finance and Administration (DFA) to collect illegal taxes under these circumstances with impunity; and (2) an amorphous notion that allowing individuals who are part of a class to file claims for refund for illegal taxes will bankrupt the State. I disagree on both counts. First, on sovereign immunity. We do have a provision in our Constitution that says the State may not be a defendant in her courts. Ark. Const, art. 5, § 20. But the General Assembly has enacted a statute permitting claims for refunds for taxes erroneously and mistakenly paid and for suits thereafter if the claims are not paid. Ark. Code Ann. § 26-18-507 (Repl. 1992). Thus, sovereign immunity has been waived by the General Assembly for erroneously paid taxes. The fact that these taxes were voluntarily paid is of no moment in light of the statute that provides a refund remedy after voluntary payment. The question then is whether § 26-18-507 has been complied with by virtue of the class-action remedy under Arkansas Rule of Civil Procedure 23. I conclude that it has been. Under comparable circumstances, we held there was compliance in Pledger v. Bosnick, supra. Using the precedent of Bosnick, we decided in Staton I that a class action was a valid means of claiming refunds under § 26-18-507 for wrongfully collected taxes. We further affirmed the chancellor who required each taxpayer to present proof of payment of the erroneous tax as a prerequisite to a refund. That is what the statute requires. Hence, the remedy afforded in this case met the statutory requirements. The majority no doubt believes that permitting a class-action suit before class members have claimed refunds puts the cart before the horse. See Ark. Code Ann. § 26-18-507(c) (Repl. 1992). Not so. The class representative, Debora Staton, filed this lawsuit on behalf of the class. Notice presumably has gone out or will go out to class members who now must prove their claims. The net effect of this, as was emphasized in Staton I, is that notices will be sent to class members under court auspices as provided by Rule 23. Better notification to wronged class members will enhance their ability to claim refunds and is without question a worthy goal. The majority writes, somewhat myopically, that individuals who have paid a $30 or $40 sales tax on an extended warranty should have claimed a refund under § 26-18-507 prior to the class-action relief. But how does that person know the tax is illegal? That person does not know. In addition, prior to the class action lawsuit, had a class member claimed a refund, that person would have been rebuffed by DFA because DFA’s position was that the tax was valid. A claim for refund would have been a totally useless act. It was only after the class action lawsuit and the decision by the chancellor that a claim had viability. Indeed, a class action is the only practical way to remedy this illegal tax, since only the most civic-minded citizen would undertake the arduous burden of obtaining judicial relief when the recovery could only be nominal at best. The majority plainly fears a catastrophic loss to the State coffers resulting from class-action claims. I do not see that. In this case, each class member must prove his or her claim, which is what we held in Staton I. And consider the alternative. The majority is holding that DFA can wrongfully collect taxes, then build a wall around itself and assert that a taxpayer has no practical recourse, even when the taxpayer can prove the claim. The rationale by DFA is it has already relied on those wrongfully collected taxes for spending purposes. Something is severely out of kilter here. If a tax is wrongfully assessed and collected against a person and the taxpayer can prove it, that person deserves to be repaid. That is the remedy § 26-18-507 provides. Again, the anomaly here is that under the decision today these people who have been wrongfully taxed have no remedy as a practical matter. In Pledger v. Bosnick, 306 Ark. 45, 811 S.W.2d 286 (1991), this court recognized that fact and permitted precisely what the class attempts to do in this case. Moreover, that was a 1991 decision and the General Assembly since that decision has taken no action to disabuse Arkansas taxpayers that that is a correct interpretation of the law. Finally, I strongly disagree with the majority’s conclusion that sovereign immunity was not contemplated by Pledger v. Bosnick, supra. That is splitting fine hairs. In Bosnick, we analyzed § 26-18-507, which waives sovereign immunity, and determined that compliance had occurred. In short, the taxpayers of this State are put in a Catch-22 situation when the majority holds that they must first seek a refund apart from the class for a tax (1) they did not know was wrongful, and (2) DFA would not have refunded in any event because DFA believed it to be a valid tax. I would not give DFA carte blanche to tax illegally and then deny refunds after class action notice and proof by the taxpayers. I respectfully dissent. Newbern and Corbin, JJ., join.