The California Supreme Court does it again. This time, in an opinion by Justice Kruger. Another opinion that begins by cogently summarizing both what the case is about and how it gets resolved. It reads (with citations omitted):
Under California law, a person who wants to challenge a tax ordinarily must first pay the tax and then seek available relief from tax authorities; if that effort is unsuccessful, the person may then file a tax refund action in court. Here we consider how these tax-challenge procedures apply in a dispute concerning a unique financing arrangement in which individuals repay funds in the form of taxes.
The arrangements at issue owe their existence to California’s Property Assessed Clean Energy (PACE) program, a program that allows local governments to provide homeowners with financing for energy efficiency home improvements in exchange for a voluntary special assessment added to their property taxes and secured by a lien on their real property. Although many local governments have adopted the PACE program, few run the program themselves; most have contracted with private companies. Plaintiffs are homeowners who have entered into PACE contracts administered by private entities. Plaintiffs allege that these private PACE administrators should have, but did not, comply with consumer protection and other regulatory requirements applicable to consumer lenders. Plaintiffs filed suit under the Unfair Competition Law (UCL), seeking various restitutionary and injunctive remedies, including an order requiring the PACE administrators to return PACE assessment monies received and prohibiting them from collecting delinquent assessments, unless and until the assessments are lifted from their properties.
At this stage of the proceedings, the sole question is whether plaintiffs were required to follow the statutory procedures for challenging taxes — meaning that they should have started not by filing suit in court, but by paying the PACE assessments and then seeking administrative tax relief from local authorities. The answer depends on the nature of plaintiffs’ claims and the relief they seek. By statute, PACE assessments are collected at the same time and in the same manner as local taxes, and so are subject to the same correction, cancellation, and refund rules as other taxes. Because plaintiffs’ central claims for relief effectively seek to invalidate the PACE assessments and prevent their future collection, plaintiffs are required to follow the applicable statutory procedures for challenging taxes. But plaintiffs are not required to follow the statutory tax relief procedures in order to pursue other, nontax-related, remedies concerning the administration of the PACE loans. We affirm in part, reverse in part, and remand for further consideration of whether plaintiffs should be granted leave to amend their complaints to plead only claims for relief that neither directly nor indirectly challenge a tax."
I'm not really sure that the PACE programs, or underlying legal issues, were really worth the rare grant of review by the California Supreme Court. But given that review was indeed granted, it's nice to see a great three-paragraph introduction at the outset.
Let's hope it becomes a trend.
