Judge: Holly J. Fujie, Case: 23STCV14351, Date: 2023-08-22 Tentative Ruling

Case Number: 23STCV14351    Hearing Date: August 22, 2023    Dept: 56

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

MOVING PARTY: Defendant City of Carson (“Moving Defendant” or the “City”)

RESPONDING PARTY: Plaintiffs

The Court has considered the moving, opposition and reply papers.

BACKGROUND

This action arises out of a dispute over the assessment of a municipal tax.  Plaintiffs’ complaint (the “Complaint”) alleges a claim for refund of illegally assessed taxes paid/damages. 

In relevant part, the Complaint alleges: In 2017, City voters approved “Measure C,” a tax proposal that imposes a business tax on businesses that operate oil refineries or facilities that store petroleum products in the City.  (Complaint ¶¶ 1, 4.)  On about April 27, 2022, Moving Defendant issued a Notice of Deficiency (the “NOD”) that indicated that Plaintiffs owed additional taxes pursuant to Measure C.  (Complaint ¶ 26.)  On May 25, 2022, Plaintiffs paid the amount assessed by the City as stated in the NOD.  (Complaint ¶ 29.)  Plaintiffs thereafter filed an administrative claim for a refund by mailing the claim to the City clerk on March 13, 2023.  (Complaint ¶ 46.)  Moving Defendant denied the administrative claim on April 27, 2023.  (See id., Exhibit 2.) 

Moving Defendant filed a demurrer (the “Demurrer”) on the grounds that the Complaint fails to allege sufficient facts to constitute a cause of action. 

REQUEST FOR JUDICIAL NOTICE

            Moving Defendant’s Request for Judicial Notice is GRANTED.

EVIDENTIARY OBJECTIONS

            Moving Defendant’s objections to the Declaration of Eric J. Miethke (“Miethke Decl.”) are SUSTAINED to the extent that the Miethke Declaration offers extrinsic evidence to support the contention that the allegations in the Complaint are legally sufficient.

DISCUSSION

Meet and Confer

The meet and confer requirement has been met.

Legal Standard

A demurrer tests the sufficiency of a complaint as a matter of law.  (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.)  The court accepts as true all material factual allegations and affords them a liberal construction, but it does not consider conclusions of fact or law, opinions, speculation, or allegations contrary to law or judicially noticed facts.  (Shea Homes Limited Partnership v. County of Alameda (2003) 110 Cal.App.4th 1246, 1254.)  With respect to a demurrer, the complaint must be construed liberally by drawing reasonable inferences from the facts pleaded.  (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.)  A demurrer will be sustained without leave to amend if there exists no reasonable possibility that the defect can be cured by amendment.  (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) 

            Moving Defendant argues that the Complaint fails to state a cause of action because it does not allege that Plaintiffs exhausted their administrative remedies set forth in the Carson Municipal Code (“CMC”) before seeking judicial recourse.  In their opposition (the “Opposition”), Plaintiffs argue that the refund administrative procedures set forth in the CMC are preempted by the Government Claims Act (the “GCA”), and that Plaintiffs’ compliance with the GCA is sufficient.

Exhaustion of Administrative Remedies

A party ordinarily must exhaust an administrative remedy available before seeking judicial relief.  (Campbell v. Regents of University of California (2005) 35 Cal.4th 311, 321.) The exhaustion of an administrative remedy requires a party to seek relief from the administrative agency and obtain a decision from the final administrative decisionmaker before suing in court.  (Coachella Valley Mosquito & Vector Control Dist. v. California Public Employment Relations Bd. (2005) 35 Cal.4th 1072, 1080.)  The exhaustion requirement affords the administrative agency an opportunity to provide the relief requested in whole or in part, so as to avoid costly litigation or reduce the scope of litigation.  (Sierra Club v. San Joaquin Local Agency Formation Com. (1999) 21 Cal.4th 489, 501.)  The presentation of a claim pursuant to the GCA is a separate, additional prerequisite to commencing an action against the state or a local public entity and is not a substitute for the exhaustion of an administrative remedy.  (See Richards v. Department of Alcoholic Beverage Control (2006) 139 Cal.App.4th 304, 315.)

Under the GCA, “all claims for money or damages against local public entities” are to be presented “in accordance with Chapter 1 (commencing with Section 900) and Chapter 2 (commencing with Section 910),” except as provided in Government Code section 905.  McWilliams v. City of Long Beach (2013) 56 Cal.4th 613, 618-19 (“McWilliams”).)  Among the exceptions set forth in Government Code section 905 are claims under the Revenue and Taxation Code or other statute prescribing procedures for the refund, rebate, exemption, cancellation, amendment, modification, or adjustment of any tax, assessment, fee, or charge or any portion of the charge, or of any penalties, costs, or related charge.  (Gov. Code § 905, subd. (a).)  When a claim is excepted from the Act by section 905 and is “not governed by any other statutes or regulations expressly relating thereto,” the claim “shall be governed by the procedure prescribed in any charter, ordinance or regulation adopted by the local public entity.”  (Gov. Code § 935, subd. (a).)  Matters involving a claim for refund of a local tax do not fall within the exceptions defined in Government Code section 905, subdivision (a) and are therefore subject to the GCA.  See McWilliams, supra, 56 Cal.4th at 626; Sipple v. City of Hayward (2014) 225 Cal.App.4th 349, 357 (“Sipple”).) 

            Moving Defendant argues that Plaintiffs failed to exhaust their administrative remedies because they did not submit their request for a refund to the City’s Finance Director as required under CMC 63515 or utilize the appeals process set forth by CMC  63523.  (See CMC §§ 63515, 63523.)  Plaintiffs argue that under McWilliams and Sipple, they were not required to adhere to CMC administrative procedures because city ordinances prescribing the procedure for a refund of a local tax are preempted by the GCA.   

            The Court agrees with Plaintiffs that their refund claims are subject to the GCA; however, it is not persuaded by the Opposition’s expansive interpretation of the holdings in McWilliams and Sipple.  Neither McWilliams nor Sipple discusses the issue of exhaustion of administrative remedies as a prerequisite to file a lawsuit seeking a tax refund; rather, the cases both involve municipal ordinances that were more restrictive than the GCA as to the types of refund claims that could be made.  (See Sipple, supra, 225 Cal.App.4th at 357-58 (discussing both cases).)  The CMC ordinances, in contrast, do not circumscribe the types of claims that may be made or class of persons that may bring a claim. 

            The Complaint does not allege that Plaintiffs complied with the relevant CMC provisions, as the Complaint does not allege that they made their claim to the City’s Financial Director or that they attempted an appeal.  Nor does the Complaint allege circumstances that may excuse the exhaustion requirement.  The Complaint thus fails to sufficiently allege that Plaintiffs exhausted their administrative remedies before filing suit.  The Court therefore SUSTAINS the Demurrer with 20 days leave to amend.

Moving party is ordered to give notice of this ruling.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org.  If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar. 

  Dated this 22nd day of August 2023