A state appeals panel has overruled a lower court ruling and said an Azusa couple can continue suing the city for allegedly imposing fees outside its constitutional authority.
In a September 2022 lawsuit, Carlos and Ana Carachure alleged Azusa’s water, sewer and trash franchise fees exceeded the cost of providing those services, which would violate Article XIII of the state constitution, and further claimed the city improperly used service fees to fund general services, in violation of Proposition 218.
Los Angeles County Superior Court Judge Curtis Kin agreed with the city’s position the couple couldn’t sue because it hadn’t exhausted all the available administrative remedies, including paying the fees under protest and filing a refund claim. In challenging the ruling before the California Second District Appellate Court, the Carachures argued their lawsuit was a constitutional challenge seeking relief outside the refund process.
Justice John Segal wrote the panel’s opinion, filed April 15; Justices Gail Feuer and Natalie Stone concurred.
According to court documents, the city authorized monthly sewer fees in 2011, including a sewer franchise fee equal to roughly 2% of utility revenue. In 2022, it set trash collection rates including a franchise fee of 10% of the garbage service rate.
“The franchise fees are designed to reimburse the city’s general fund for expenditures associated with providing sewer and trash service, such as for facilities, contract administration, road impacts and vehicle maintenance,” Segal wrote. “Every year the city transfers franchise fee revenue from the sewer and trash funds to the City’s general fund.”
Segal said the city’s fee protest and refund policy falls under the common “pay first, litigate later” rule, intended to prevent judicial interference with public revenue streams and services. He further said the Carachures conceded the fact they didn’t pay under protest deprives them of the right to obtain refunds. However, he also said they correctly argued that doesn’t preclude them from asking a court to stop what they allege is an ongoing violation.
“Courts in other cases have similarly held a plaintiff challenging an ordinance as unconstitutional need not pursue an administrative refund remedy,” Segal wrote.
While he agreed with the city’s argument it could’ve responded to an administrative request by repealing ordinances, he said one potential outcome doesn’t answer the question of whether the law requires citizens to request a refund before filing a lawsuit.
“The plain language of the statutory scheme requires a taxpayer to pay under protest and file a refund claim before filing a superior court action for a refund of sewer or trash fees,” Segal wrote. “It does not require the same of a plaintiff challenging the constitutionality of a city’s general practices for setting and spending such fees.”
The Carachures didn’t ask the court to order a direct refund, but the city argued the requested relief effectively stated that position because “a writ of mandate directing the city to ‘return or transfer back all solid waste service revenue transferred to the general fund during the previous three years is a ‘refund to all ratepayers,’ ” Segal wrote.
But the panel rejected that framing, saying that even granting the “speculative assertion” that a ruling against the city would result in reduced collection rates, such a change wouldn’t be a return of money to people who overpaid.
The panel reduced Judge Kin’s ruling and said the Carachures are entitled to their costs of litigating the appeal.
Representing the Carachure family is Benink & Slaves and Kearney Littlefield.
Azusa is represented by Best Best & Krieger.
The League of California Cities and California State Association of Counties filed support briefs on behalf of Azusa through Jarvis and Benjamin Fay.