By Sahang-Hee Hahn and Pilar Mata

The California Supreme Court held that taxpayers may file a class action lawsuit to claim a refund of local telephone user taxes (TUT) paid to the City of Long Beach. The taxpayer class alleged that the City unlawfully collected the TUT on services that were determined to be nontaxable under the Federal Excise Tax (and therefore were not subject to the TUT), and that the City had not properly obtained voter approval to amend its TUT ordinance as required by Proposition 218. The City filed a demurrer to dismiss the taxpayers’ complaint, arguing primarily that Long Beach’s municipal code expressly disallows class claims for refund. The City appealed the Court of Appeals’ denial of the demurrer, arguing that this case was distinguishable from the California Supreme Court’s recent decision in Ardon v. City of Los Angeles, 52 Cal.4th 241 (2011). Ardon held that the Government Claims Act permits class action claims for refund against a local government entity “in the absence of a specific tax refund procedure set forth in an applicable governing claims statute.” The City argued that the Long Beach municipal code constituted a “statute” for this purpose. The California Supreme Court rejected this argument, ruling the taxpayers could file a class action suit against the City, even though the local ordinance directly prohibits such claims. McWilliams v. City of Long Beach, Case No. S202037 (Ca. 2013).