In this opinion we adjudicate two appeals challenging a utility user tax (UUT) enacted pursuant to a measure approved by the voters. Appellants contend the UUT is unlawful because it violated the voters' due process and free speech rights and because the tax was imposed in violation of Proposition 218 and the Elections Code. We publish this case to address these important substantive legal issues and to provide an example of when the doctrine of judicial estoppel should apply.
The present appeals arise from two separate superior court class actions against defendant and respondent County of Los Angeles (County): the first by plaintiff and appellant Larry Pitts and the second by plaintiffs and appellants Patrick Owens and Patricia Munoz. Pitts appeals an order denying
In both appeals appellants challenge the legality of the County's UUT enacted pursuant to a measure approved by the voters on November 4, 2008 (Measure U). We reject all of appellants' arguments on the merits.
In January 1991, the County enacted the Utility User Tax Ordinance (L.A. County Code, § 4.62.010 et seq.), establishing a UUT (the 1991 UUT). The 1991 UUT imposed a 5 percent tax on telephone, electricity and gas usage.
In May 2005, Joe Oronoz and Larry Pitts filed a class action suit on behalf of taxpayers in the unincorporated parts of the County (the Oronoz/Pitts class action) challenging the 1991 UUT on the grounds that it violated Propositions 13 and 62
At a mediation on June 30, 2008, the parties in the Oronoz/Pitts class action executed a two-page short form settlement agreement. The agreement provided that the County would place $10 million in a general fund to be used to address education, medical needs, homelessness and/or police and fire
The short form settlement agreement also stated: "County to hold an election in November 2008 to validate the UUT pursuant to applicable law at a rate of 4.5%. County agrees not to seek to raise the UUT rate for a period of 15 years following the election." Additionally, the agreement provided that if the UUT was not approved by the voters, the amount of money collected by the County from July 1, 2008, to the date of election would be added to the claims fund. Appellants contend that the amount of UUT the County was likely to generate during this time period was $25 million.
The agreement further provided that the settlement was contingent upon approval by the County Board of Supervisors (Board) and that retired judge Dickran Tevrizian retained "jurisdiction to mediate any disputes in the drafting of the settlement agreement." The agreement also stated that notice to class members of the settlement "shall not be sent until after the election is held in November, 2008." Class counsel was required by the agreement "to cooperate with the County in seeking voter approval of the UUT."
On July 1, 2008, the Board approved of the settlement in the Oronoz/Pitts class action in a closed session. The Board resolved that "[t]he substance of the settlement will be disclosed upon inquiry by any person as soon as the settlement becomes final following approval by all parties."
In the official ballot sent to voters in unincorporated areas of the County, Measure U stated: "
The official ballot also included an impartial analysis by County Counsel, arguments in favor of and against Measure U, and a redlined version of the Utility User Tax Ordinance, which set forth the exact language of the proposed ordinance and the changes made to the previous ordinance. We shall discuss the ballot materials in greater detail in our discussion of the merits of appellants' challenge of the legality of Measure U.
Prior to the election, the County provided the ballot materials discussed ante to the voters. Larry Pitts received these materials. On November 4, 2008, 62.92 percent of the voters approved Measure U. We shall refer to the UUT enacted pursuant to Measure U as the "2008 UUT."
On November 5, 2008, after lengthy negotiations, the Oronoz/Pitts plaintiffs executed an 18-page long form settlement agreement.
The long form settlement agreement further provided that plaintiffs Joe Oronoz and Larry Pitts and all class members released the County of all claims. We shall discuss this release in more detail post.
The agreement also stated that the County denied any wrongdoing or liability in connection with the 1991 UUT. Additionally, the agreement provided that if the superior court did not approve the settlement, the agreement would be null and void.
On November 6, 2008 — two days after the election — the Oronoz/Pitts plaintiffs and the County filed a joint motion for preliminary approval of the settlement and approval of forms and methods of notifying the certified class of the settlement (preliminary settlement approval motion). In this motion, the parties argued that the settlement provided non-monetary benefits, including requiring the County "to hold an election to validate the UUT pursuant to applicable law." The motion emphasized that the settlement was fair because
In his declaration in support of the preliminary settlement approval motion, Lead Class Counsel Paul Heidenreich stated that the nonmonetary benefits of the settlement, including the November 4, 2008, election, "were important to the settlement obtained for the class." Heidenreich further stated: "Without the inclusion in the settlement package of the non-monetary benefits, the proposed settlement was not acceptable to class counsel."
Concurrently with the preliminary settlement approval motion, the Oronoz/Pitts plaintiffs filed a motion for preliminary approval of attorney fees, costs and payments to the representative plaintiffs. In this motion, the Oronoz/Pitts plaintiffs sought an award of $50,000 to each class representative and an award of attorney fees in the amount of $25 million to class counsel. They argued that their counsel deserved to be paid $25 million because they secured many benefits for the class, including the "Constitutional right to vote." (Italics & boldface omitted.)
Indeed, in listing the six primary benefits secured by the settlement, the Oronoz/Pitts plaintiffs placed the election held on November 4, 2008, at the top of the list. The motion stated: "The benefits are: [¶] First, the settlement vindicated the taxpayers['] California Constitution, Article XIII
On November 20, 2008, the trial court entered an order granting preliminary approval of the settlement and authorizing notice to be provided to the class. Pursuant to this order, over 390,000 taxpayers were given notice of the settlement and a right to object. Only one taxpayer filed an objection.
On December 1, 2008, the trial court granted the Oronoz/Pitts plaintiffs' motion for preliminary approval of attorney fees and costs, and awarded plaintiffs' counsel $7,637,868.75 in attorney fees. The order further provided that the attorney fees "shall be paid from the settlement funds if and when final approval of the class settlement is granted."
Both the County and the Oronoz/Pitts plaintiffs filed briefs in support of the trial court's final approval of the settlement. In one of their briefs, the Oronoz/Pitts plaintiffs acknowledged that the sole objector to the settlement argued that Measure U was "confusing."
On August 11, 2009, Patrick Owens and Patricia Munoz filed a class action complaint against the County challenging the legality of Measure U and the 2008 UUT (the Owens class action). The complaint alleged that Measure U violated, inter alia, the class members' due process and free speech rights, as well as Proposition 218.
On November 12, 2010, the County filed a motion for summary judgment in the Owens class action on the grounds that plaintiffs failed to timely file and serve verified election contest statements as required by the Elections Code. The trial court entered an order denying the motion on February 15, 2011.
The order stated that the court had read three cases cited by plaintiffs' counsel
Subsequently, the superior court set a briefing schedule for resolution of plaintiffs' Constitution-based challenge to Measure U. Pursuant to that schedule the parties filed briefs on plaintiffs' claims that Measure U violated the voters' due process rights.
In the meantime, on March 22, 2011, Larry Pitts filed a motion to enforce the settlement in the Oronoz/Pitts class action. Pitts made the motion pursuant
On April 26, 2012, the superior court held a hearing on (1) plaintiffs' motion in the Owens class action to invalidate Measure U and (2) Pitts's motion in the Oronoz/Pitts class action to enforce the settlement. After the hearing, the court entered an order denying both motions.
In the order, the court rejected plaintiffs' arguments on the merits. The court also found that Pitts waived his claims by signing the settlement agreement and was judicially estopped from challenging the election because he was taking a position contrary to the position he took in support of the settlement.
On May 10, 2012, the superior court entered a final judgment in the Owens class action in favor of the County. Owens and Munoz filed a timely notice of appeal of the judgment. On the same day, Pitts filed a timely notice of appeal of the order denying his motion to enforce the settlement.
Appellants contend that the ballot materials for Measure U were so profoundly deceptive that they violated the voters' due process rights. They also argue that Measure U violated Proposition 218 and the voters' free speech rights under the California Constitution. Additionally, Pitts contends that the November 4, 2008, election violated the requirements of the Elections Code. As a result of these alleged constitutional and statutory violations, Pitts argues, the election violates the judgment and the settlement in the Oronoz/Pitts class action because it was not conducted pursuant to applicable law.
The County argues that Measure U did not violate the voters' due process or free speech rights, Proposition 218 or the Elections Code. Additionally, the
Under the long form settlement agreement, Pitts "forever discharged" the County "from any and all Released Claims." "Released Claims" was defined by the agreement as including "any and all claims ... and causes of action of every nature and description whatsoever, ascertained or unascertained, suspected or unsuspected ... of the Plaintiffs and all Class Members that were or could have been brought against the County ... in the Complaint, from the beginning of the Class Period [(Feb. 16, 2004)] to November 4, 2008, arising from the facts alleged in the Complaint, including but not limited to charging, billing, or collection activity related to the UUT ... based on the
The trial court found that when Pitts signed the long form settlement agreement on November 5, 2008, "the events about which Pitts now complains had all occurred." The court continued: "These events were public. They were well known to Pitts and his counsel. Indeed, Pitts and his fellow plaintiffs had caused this November 4, 2008 election to occur by means of this very lawsuit. The County had sent the ballot booklet to the Pitts household.... This all happened before Pitts signed his November 5, 2008 settlement." There was substantial evidence to support these factual findings, and Pitts does not dispute them on appeal.
In light of these undisputed facts, we conclude that prior to executing the long form settlement agreement, Pitts "could have brought" against the County the very same substantive claims he now asserts. Accordingly, Pitts is barred by the long form settlement agreement from pursuing his current challenge to Measure U and the 2008 UUT.
Although Pitts attempts to draw a sharp distinction between the 1991 UUT and the 2008 UUT approved in the election, the long form settlement agreement stated that the purpose of the election was to "validate" the UUT. Moreover, Pitts's current substantive claims arise from the same basic grievance he asserted in his pleadings, namely that the UUT is unlawful because it was not approved by the voters. He contends that the 1991 UUT was unlawful because there was no election at all, while the 2008 UUT is unlawful because the election violated certain constitutional and statutory requirements.
When the long form settlement agreement is read in its entirety and placed into context, it is clear that the County agreed to make tens of millions of dollars in payments and to hold an election to validate the 1991 UUT, as modified, in order to resolve all claims regarding the alleged unlawful nature of the tax. It is also clear that Pitts and the other Oronoz/Pitts plaintiffs understood that the settlement resolved all of their potential claims against the County. On the first page of the long form settlement agreement, for example, it states that plaintiffs and their lawyers believe it is in the best interests of all class members "to resolve finally and completely the potential claims of the Plaintiffs and the Class Members against the County at this time by this Settlement." (Italics added.) In other words, the County settled the case to buy peace. It is unimaginable that the County would have executed the long form settlement agreement on the day of the election, as it did, if it knew that Pitts could challenge the 2008 UUT based on facts that already existed at the time.
Pitts argues that because the short form settlement agreement required his attorneys to "cooperate with the County in seeking voter approval of the UUT," he was precluded from raising objections to Measure U prior to the election. We disagree. Nothing in the short form settlement agreement prohibited Pitts or his counsel from objecting to ballot materials on the grounds that they allegedly violated the constitutional and statutory rights of the voters.
Finally, Pitts makes two almost incomprehensible arguments regarding the long form settlement agreement. Pitts contends that "the settlement had to have been enforceable at the time the rights were waived by the party who allegedly waived those legal rights." He also argues at length that both the settlement agreement and the judgment were not enforceable at the time of the election. Pitts seems to be arguing that because the trial court had not approved the long form settlement agreement and entered judgment as of the date of the election, he is not bound by the release provisions in the contract. He does not and cannot, however, cite any relevant authority to support his position.
We reject all of Pitts's arguments regarding the long form settlement agreement. Pitts is barred by the agreement from challenging Measure U.
We review the findings of fact upon which the application of judicial estoppel is based under the substantial evidence test. (Blix Street Records, Inc. v. Cassidy (2010) 191 Cal.App.4th 39, 46 [119 Cal.Rptr.3d 574] (Blix).) When the facts are undisputed, we independently review whether the elements of judicial estoppel have been satisfied. (Ibid.) Whether the doctrine should be applied even if the necessary elements are satisfied is a matter within the discretion of the trial court, which we review under the abuse of discretion standard. (Id. at pp. 46-47.)
"This doctrine rests on the principle that litigation is not a war game unmoored from conceptions of ethics, truth, and justice. It is quite the reverse. Our adversarial system limits the affirmative duties owed by an advocate to his adversary, but that does not mean it frees him to deceive courts, argue out of both sides of his mouth, fabricate facts and rules of law, or seek affirmatively to obscure the relevant issues and considerations behind a smokescreen of self-contradictions and opportunistic flip-flops." (Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, 558 [75 Cal.Rptr.3d 19].)
Each of the elements of judicial estoppel is satisfied in this case. First, Pitts took two different positions regarding Measure U. Before the trial court approved the settlement and entered judgment, Pitts championed the benefits of Measure U to the voters. He argued that the settlement provided the nonmonetary benefit of vindicating the taxpayers' "right to vote." The benefit of holding the election, according to Pitts, was "[p]riceless." Pitts's lead counsel, too, boasted of the benefits of the election, stating under oath that he would not have approved the settlement if the County had not agreed to the election.
After the trial court approved the settlement and entered judgment, however, Pitts changed his tune. He argued, in essence, that Measure U was a sham because of the County's alleged misrepresentations to the voters and other wrongdoing. According to Pitts, the County's misconduct was so egregious that the voters' constitutional rights were violated and the election should be overturned.
Pitts asserted both of his inconsistent positions in judicial proceedings, namely in the proceedings in the superior court in the Oronoz/Pitts class action. Further, he was successful in asserting his first position. Based in part on his arguments regarding the value of the election, the trial court approved the settlement, awarded Pitts $10,000, and awarded his attorneys about $7.6 million in fees.
The two positions Pitts took were totally inconsistent. The election cannot at the same time be a priceless benefit to the voters and a sham that deprived them of due process.
Finally, Pitts did not take his first position as a result of ignorance, fraud or mistake. Pitts knew all of the facts he now claims made the election a sham when he claimed the election was a priceless benefit to the voters.
Having determined that the elements of judicial estoppel have been satisfied, we must decide whether the trial court abused its discretion in applying the doctrine under the particular facts and circumstances of this case. This is not a difficult decision. Pitts's attempt to revive his action against the County is exactly the kind of litigation conduct judicial estoppel is meant to prevent. When it suited their interests, Pitts and class counsel championed the election that had already taken place. After securing millions of dollars in payments from the County, they attacked the election as an affront to the constitutional rights of the class they represent. We have no
Even if Pitts's substantive claims were not barred by the long form settlement agreement and the doctrine of judicial estoppel, we would reject them on the merits. Pitts, Owens and Munoz argue that the 2008 UUT is unlawful because Measure U violated (a) the voters' due process rights, (b) the voters' free speech rights, and (c) Proposition 218. Additionally, Pitts contends that the November 4, 2008, election violated various provisions of the Elections Code. Each one of these substantive claims raises questions of law we review de novo. (Greene v. Marin County Flood Control & Water Conservation Dist. (2010) 49 Cal.4th 277, 287 [109 Cal.Rptr.3d 620, 231 P.3d 350].)
Although the California appellate courts have recognized the "possibility" that an impartial analysis of a county measure or other ballot materials can be so misleading and inaccurate "that constitutional due process requires invalidation of the election" (Kerr, supra, 106 Cal.App.4th at pp. 919, 934), no California appellate court, to our knowledge, has invalidated an election on this basis.
The courts have set a "very high" bar (Kerr, supra, 106 Cal.App.4th at p. 934) for litigants to successfully mount a postelection due process challenge to a ballot measure for good reason. The trial court in this case aptly
In Horwath, a measure authorizing a city rent control ordinance was placed on the ballot. The ordinance set a new "base rent" in the city's rent control scheme, which "resulted in an 8 percent rent rollback." (Horwath, supra, 212 Cal.App.3d at p. 770.) The ballot materials, however, did not discuss the rent rollback. (Ibid.) Further, the voter information pamphlet did not contain the actual text of the measure, though voters could request a copy of it by mail. (Id. at pp. 770-771.)
The court concluded that the city attorney violated a statute requiring an impartial analysis of the measure. (Horwath, supra, 212 Cal.App.3d at p. 778.) It also concluded, however, that the omission of a definition of the lawful base rent on the ballot materials fell "somewhere in between a minimal defect and one going to the core character and purpose of the proposed legislation." (Id. at p. 779.) In light of general disclosures in the ballot materials regarding nature of the ordinance, the preelection publicity on the rent rollback, and the availability of the full text of the proposed ordinance, the court held that the city's misconduct did not violate the voters' due process rights. (Ibid.)
Turning to the present case, the alleged deficiencies in the ballot materials relating to Measure U do not even rise to the level of a "minimal defect"
Next, appellants contend that the County misled the voters by falsely stating in the ballot materials "that a `yes' vote would result in a tax reduction." We reject this argument. The summary of the measure on the ballot and the impartial analysis accurately stated that the tax rate would decrease. The opposition argument to Measure U stated that while the tax rate would decrease, "so many more services would be taxed, the overall amount people will pay
Appellants contend that the summary and impartial analysis of Measure U falsely stated that the UUT would fund essential services, including those related to sheriff's deputies, parks, libraries, and street repairs. Nothing in the record, however, indicates this statement is inaccurate.
Appellants also argue that the County failed to inform the voters about a number of facts and circumstances relating to Measure U, including (1) the 1991 UUT had never been approved by the voters and was unlawful, (2) "new taxes" would be enacted by Measure U, (3) a "no" vote would "eliminate" the UUT and prevent the imposition of a $65-million-per-year tax, and (4) a "no" vote was a vote for $25 million in refunds. The County, however, was not required to state any of these things in the summary of the measure or in the impartial analysis.
The County, through its counsel, was required to provide an impartial title and summary of the purpose of the measure (Elec. Code, § 9105, subd. (a)), as well as a separate impartial analysis showing the effect of the measure (Elec. Code, § 9160, subd. (b)). It was not required to inform the voters of all of the arguments against the measure. That task fell to the opponents of the measure, who informed the voters of many of the arguments appellants claim the County concealed. For example, the argument against Measure U in the ballot materials stated that the County was proposing a "
Additionally, the County was not required to inform the voters of the details of the settlement prior to the election.
Appellants argue that the ballot materials for Measure U violated their free speech rights under article I, section 2, subdivision (a) of the California Constitution
In support of their free speech arguments, appellants primarily rely on Stanson v. Mott (1976) 17 Cal.3d 206 [130 Cal.Rptr. 697, 551 P.2d 1]
Our conclusion that appellants incorrectly characterized a Stanson claim as a free speech claim does not end our discussion of this matter. We shall also discuss the merits of appellants' Stanson claim against the County.
The court also recognized that in some cases "the line between unauthorized campaign expenditures and authorized informational activities is not so clear." (Stanson, supra, 17 Cal.3d at p. 222.) "In such cases," the court stated, "the determination of the propriety or impropriety of the expenditure depends upon a careful consideration of such factors as the style, tenor and timing of the publication ...." (Ibid.)
The court also stated that the "potential danger to the democratic electoral process" discussed in Stanson "is not presented when a public entity simply informs the public of its opinion on the merits of a pending ballot measure or of the impact on the entity that passage or defeat of the measure is likely to have. Rather, the threat to the fairness of the electoral process to which Stanson referred arises when a public entity or public official is able to devote funds from the public treasury, or the publicly financed services of public employees, to campaign activities favoring or opposing such a measure." (Vargas, supra, 46 Cal.4th at pp. 36-37.)
The measure at issue in Vargas was a proposal to reduce the UUT of the defendant city. The city opposed the measure and produced various documents and reports, including a newsletter to city residents, indicating the services that would be cut if the measure passed. (Vargas, supra, 46 Cal.4th at pp. 11-12, 20.) The plaintiffs claimed that the city improperly distributed "`campaign materials.'" (Id. at p. 13.) The court, however, held that the city merely engaged in informational activity rather than campaign activity. (Id. at pp. 37-38.)
Here, appellants do not allege any facts indicating that the County spent public funds to engage in campaign activities in support of Measure U. For example, there is no allegation that the County purchased bumper stickers, posters, or television or radio advertisements to promote the measure. Further, the summary and impartial analysis of Measure U do not endorse the measure and, as we explained ante, are reasonably fair and accurate. Appellants thus cannot maintain a claim against the County under Stanson and Vargas.
Article XIII C, section 2, subdivision (c) of the California Constitution (subdivision (c)) provides: "Any general tax imposed, extended, or increased,
We shall refer to the period between January 1, 1995, and November 6, 1996, as the "window period." According to the Howard Jarvis Taxpayers Association, the sponsor of Proposition 218, "the window period provision was intended to discourage local taxing authorities from rushing to impose taxes after the ballot measure became public knowledge but before its enactment." (McBrearty v. City of Brawley (1997) 59 Cal.App.4th 1441, 1450 [69 Cal.Rptr.2d 862] (McBrearty), disapproved on other grounds in Howard Jarvis Taxpayers Assn. v. City of La Habra (2001) 25 Cal.4th 809, 816 [107 Cal.Rptr.2d 369, 23 P.3d 601] (Howard Jarvis).) We agree with this assessment of the purpose of the window period. (See McBrearty, at p. 1450 [adopting assessment of Howard Jarvis Taxpayers Association].)
Owens and Munoz argue that the 1991 UUT is "subject to the provisions of subdivision (c) because it was `imposed' on the Taxpayers [(i.e., the class of taxpayers they purport to represent)] between January 1, 1995, and November 6, 1996." They further contend that the 1991 UUT violates Proposition 218 because it was not approved by a majority of the voters prior to November 6, 1998.
Owens and Munoz, however, have no standing to challenge the 1991 UUT. Their complaint alleges they represent all persons "living in and/or operating businesses in the unincorporated areas of Los Angeles County from November 4, 2008 to the present" who were charged the UUT "approved pursuant to the illegal November 4, 2008 election." Other parties, including Pitts, who represented the class of taxpayers who paid the 1991 UUT, settled all claims against the County arising from the alleged illegal nature of the tax. Accordingly, whether the 1991 UUT violated Proposition 218 is irrelevant to the class action lawsuit brought by Owens and Munoz.
Owens and Munoz's reliance on Howard Jarvis is misplaced. There, the plaintiffs sued a city for allegedly imposing and collecting a UUT on its residents without the voter approval mandated by Proposition 62 (Gov. Code, §§ 53720-53730). (Howard Jarvis, supra, 25 Cal.4th at p. 812.) The issue was when the statute of limitations began to run. (Ibid.) The court held that "if, as alleged, the tax is illegal, its continued imposition and collection is an ongoing violation, upon which the limitations period begins anew with each collection." (Ibid.) The court did not, however, discuss the meaning of the term "impose" for purposes of subdivision (c). Howard Jarvis thus does not hold that a tax first imposed prior to January 1, 1995, is subject to Proposition 218.
Pitts argues that the 2008 UUT violated Proposition 218 because the County did not state in the ballot materials that "Measure U would (1) enact, for the first time, a voter approved UUT and (2) would enact brand new taxes." Pitts confuses election due process requirements with the requirements of Proposition 218. Proposition 218 requires voter approval of new local government taxes. The County fully complied with Proposition 218 by holding an election on Measure U.
Pitts, furthermore, does not have standing to pursue this argument. The judgment and the settlement agreement required the County to hold an election pursuant to applicable law, but stated nothing about interpreting the election results. Whether the 2008 UUT is a general or special tax is an issue relevant to interpreting the election results, not whether the election was held pursuant to applicable law. Pitts therefore cannot challenge the County's interpretation of the election results as part of his motion to enforce the settlement.
In support of his position, Pitts essentially rehashes the same contentions he made in his due process claim. He contends, for example, that the measure title was misleading. He also contends that ballot materials were deceptive and unfair because they did not disclose the UUT was a "new tax" or that a "no" vote would have resulted in $25 million in tax refunds. For the reasons we explained ante, we hold that the ballot materials were reasonably fair and accurate. We therefore reject Pitts's claim that Measure U violated the Elections Code.
The judgment dated May 12, 2012, in the Owens class action is affirmed. The order dated April 26, 2012, in the Oronoz/Pitts class action is affirmed. Respondent County of Los Angeles is awarded costs on appeal in both appeals.
Klein, P. J., and Croskey, J., concurred.
