Court Opinion

ID: 9696517
Source: CourtListenerOpinion
Date Created: 2023-08-25 18:50:05.730393+00
Date Added: 2024-06-11T18:20:23.097678
License: Public Domain

DUNN, Justice
(dissenting).
To the extent the majority opinion denies attorney fees under the “substantial benefit *285rule” as defined in Mills v. Electric Auto-lite Co., 396 U.S. 375, 394, 90 S.Ct. 616, 626, 24 L.Ed.2d 593, 607 (1970), I must respectfully dissent.
My review of this case convinces me that the public did receive a substantial benefit as a result of the litigation instituted in Van Emmerik v. State, 298 N.W.2d 804 (S.D.1980). The majority opinion notes in footnote 2 that this litigation prompted utility companies to seek sales tax refunds from the South Dakota Department of Revenue for sales tax collected in excess of that statutorily authorized. Although the refund was ultimately denied as a result of our decision in State ex rel. Van Emmerik v. Janklow, 304 N.W.2d 700 (1981) cert. den. 454 U.S. 1131, 102 S.Ct. 986, 71 L.Ed.2d 285 (1982), tax savings were, nonetheless, experienced by South Dakota taxpayers. During the period of December of 1980, to May of 1981, the taxpayers of South Dakota felt the rate of sales tax on utility services decrease from five percent to the legal three percent rate. As noted in the majority opinion, this resulted in a savings to South Dakota taxpayers and utility companies of approximately $2,226,000.
SDCL 15-17-18 authorizes the award of attorney fees in suits brought by taxpayers to recover, public funds which have been wrongfully expended. While we note the statute deals with the funds expended by cities, school districts and counties, we still find the rationale stated therein to be persuasive in the case at hand. We noted in Carlson v. City of Faith, 75 S.D. 432, 436-37, 67 N.W.2d 149, 151 (1954), that reimbursing attorney fees, costs and expenses was intended “to make the aggressive taxpayer whole and to avoid imposing on him the penalty of personally paying his attorneys in an action brought in behalf of all other taxpayers to redress a public wrong.”
The majority would have us read the rationale provided in Carlson, supra, narrowly and deny recovery of attorney fees because no refund was actually made to the public treasury in this case. While a refund was blocked in this case in State ex rel. Van Emmerik, supra, the public still received an
“equitable refund” in the amount of $2,226,-000 which they received in the form of lower utility sales tax bills. This is an amount actually recovered and saved by the public as a result of this litigation. While acknowledging this benefit to the public, the majority opinion still concludes the proponents of this case should bear the entire cost of the litigation. In my mind this is inequitable and it violates the rationale provided in Carlson, supra, by “penalizing” the taxpayer for bringing the action.
I believe the attorneys should be compensated for their services in this litigation and I suggest the following alternatives to accomplish this end. First, I would suggest payment could be made from sales tax revenue already collected from utility customers. Contrary to the majority’s characterization of this approach as holding the State liable, this would simply be a payment by the taxpaying public for services rendered. In effect, it would be an allocation from sales tax collected from the public for attorney fees incurred. While this would temporarily result in utility sales tax collections below that statutorily authorized, it would be a small price to pay for the estimated $2,226,000 benefit received. My second alternative would not reduce the utility sales tax collection at all. Here, I would suggest that utility customers be temporarily billed for the attorney fees awarded as an add-on to the utility sales tax. Spread across the consuming public this would mean only pennies in temporary increases as compensation for approximately $2,226,000 in tax savings. Moreover, it would preserve our position as stated in Carlson, supra, which is to avoid penalizing citizens who protect the public interest by awarding them attorney fees when they are successful in their efforts.
I am authorized to state that Justice HENDERSON joins in this dissent.