The California Supreme Court’s decision in Ardon v. Los Angeles clarifies that in certain circumstances, taxpayers can use class actions to seek refunds from local governments. The unanimous decision settled a long-standing dispute between taxpayers and local governments that previously required local taxpayers to file individual refund claims even when local ordinances did not require them.

In this case, the Plaintiff, Mr. Ardon, filed a class action lawsuit on behalf of himself and similarly situated individuals challenging the Los Angeles telephone users tax and seeking refund of funds collected under the tax over the previous two years. Mr. Ardon received a notice from the Los Angeles City Attorney rejecting his refund claim on behalf of a class due to lack of legal standing. Mr. Ardon then filed a complaint against the City, alleging, among other claims, that because there was no applicable claim for refund provision in the City’s statutes, certification could be granted under Government Code section 910. Both the trial court and the appellate court denied Mr. Ardon his right to seek refund on behalf of a class, primarily based upon the California Supreme Court’s ruling in Woosley v. State of California (1992) 3 Cal.4th 758, that rejected class-action status for a challenge to the state’s taxes on vehicles bought by Californians in other states.

Here, however, the Supreme Court held that Woolsey’s holding does not apply to locally assessed taxes, finding instead that City of San Jose v. Superior Court (1974) 12 Cal.3d 447, which authorized class actions against localities, was the governing authority. The Court also held that article XIII, section 32 of the California Constitution, which prohibits certain tax actions, does not apply to local taxes. Thus, absent a specific local statutory refund procedure, a taxpayer may file a tax refund claim against a local public agency on behalf of a purported class pursuant to Government Code section 910.  

This ruling is important because class-action status often determines whether it makes sense to challenge a tax. When only small amounts per taxpayer are at stake, there is often little incentive to hire competent counsel to pursue a refund. However, when the amounts of a class are combined, it may make sense to attempt to obtain a refund of a wrongfully assessed tax. This decision gives taxpayers the ability, in certain circumstances, to accumulate resources and take principled stands against wrongfully assessed taxes.