Opinion
2012 CA 0373
12-21-2012
MICHAEL X. ST. MARTIN, LOUIS ROUSSEL, III, WILLIAM A. NEILSON, ET AL v. STATE OF LOUISIANA; AND CYNTHIA BRIDGES, IN HER CAPACITY AS SECRETARY OF THE LOUISIANA DEPARTMENT OF REVENUE
Michael X. St. Martin Joseph G. Jevic III Houma. Louisiana Deborah M. Sulzer A. Albert Ajubita Douglas L. Salzer New Orleans, Louisiana Counsel for Plaintiffs-Appellees Michael X. St. Martin, Louis Roussel, III, and William A. Neilson, et al Frederick Mulhearn Shone T. Pierre Donald Bowman Miranda Conner Antonio Ferachi Adrienne D. Quillen Christopher K. Jones Nancy B. Gilbert Virginia J. McLin Baton Rouge, Louisiana Counsel for Defendant-Appellant Cynthia Bridges, Secretary, Department of Revenue, State of Louisiana
NOT DESIGNATED FOR PUBLICATION
ON APPEAL FROM THE THIRTY-SECOND JUDICIAL DISTRICT COURT
NUMBER 162,701, PARISH OF TERREBONNE
STATE OF LOUISIANA
HONORABLE JOHN R. WALKER, JUDGE
Michael X. St. Martin
Joseph G. Jevic III
Houma. Louisiana
Deborah M. Sulzer
A. Albert Ajubita
Douglas L. Salzer
New Orleans, Louisiana
Counsel for Plaintiffs-Appellees
Michael X. St. Martin,
Louis Roussel, III, and William A.
Neilson, et al
Frederick Mulhearn
Shone T. Pierre
Donald Bowman
Miranda Conner
Antonio Ferachi
Adrienne D. Quillen
Christopher K. Jones
Nancy B. Gilbert
Virginia J. McLin
Baton Rouge, Louisiana
Counsel for Defendant-Appellant
Cynthia Bridges, Secretary,
Department of Revenue, State of
Louisiana
BEFORE: KUHN, PETTIGREW, AND McDONALD, JJ.
Disposition: REVERSED; BOARD OF TAX APPEALS JUDGMENT REINSTATED IN PART; REMANDED TO BOARD OF TAX APPEALS.
KUHN, J.
Defendants-appellants, Cynthia Bridges, Secretary, and Department of Revenue, State of Louisiana (DOR) appeal the district court's judgment, issued on judicial review, which reversed the judgment of the Board of Tax Appeals (BTA) and rendered a ruling certifying an action filed by plaintiffs-appellees, Michael X. St. Martin, Louis Roussel, III, and William Neilson, as a class action. We reverse the district court's judgment and, for the following reasons, reinstate that portion of the BTA judgment that denies certification of the plaintiffs' action as a class action.
FACTUAL AND PROCEDURAL BACKGROUND
This action has been the subject of protracted litigation, see St Martin v. State , 2009-0935 (La. 12/1/09), 25 So.3d 736 (concluding that BTA had jurisdiction to certify and hear class action lawsuits), and, therefore, we will limit an articulation of the facts to those germane to disposition of the issue raised in this appeal. As noted in the earlier opinion, the issue of whether the matter should be certified was not an issue before the supreme court and, therefore, it offered no opinion on the propriety of certification of the class. St. Martin , 25 So.3d at 741 n.8. In this appeal, that is the issue now before us.
Subsequent to the supreme court's opinion, on remand, BTA denied certification of plaintiffs' action as a class action in an eight-page judgment. Plaintiffs filed a petition for judicial review, challenging BTA's ruling, and the district court reversed BTA's denial of certification in a judgment that additionally certified the action as a class action, defining the class as "All persons who are or were entitled to refunds and/or credits for overpayment of Louisiana State income taxes and were not paid interest as provided by law." DOR appealed to this court, urging that plaintiffs are not entitled to certify their action as a class action.
Before BTA, DOR raised peremptory exceptions raising the objections of prescription as to St. Martin and Roussel and no right of action as to Neilson; as well as a declinatory exception, urging BTA lacked subject matter jurisdiction to award damages, attorney's fees, injunctive relief, and legal interest on plaintiffs' claims for interest under La. R.S. 47:1624. BTA sustained all the exceptions and these rulings were incorporated into the eight-page judgment. On judicial review, the district court reversed BTA's dispositions on the exceptions. Noting the interlocutory nature of the overruling of the exceptions, DOR has not appealed those reversals.
STANDARD OF REVIEW
Judicial review by the district court of a decision or judgment of BTA shall be rendered upon the record as made up before BTA and is limited to facts on the record and questions of law. BTA's findings of fact should be accepted where there is substantial evidence in the record to support them and should not be set aside unless they are manifestly erroneous in view of the evidence in the entire record. With regard to questions of law, the judgment of BTA should be affirmed if BTA has correctly applied the law and has adhered to the correct procedural standards. Crawford v. American Nat. Petroleum Co. , 2000-1063 (La. App. 1st Cir. 12/28/01), 805 So.2d 371, 377.
LAW AND ANALYSIS
A class action is a nontraditional litigation procedure that permits a representative with typical claims to sue or defend on behalf of, and stand in judgment for, a class of similarly situated persons when the question is one of common interest to persons so numerous as to make it impracticable to bring them all before the court. Dupree v. Lafayette Ins. Co. , 2009-2602 (La. 11/30/10), 51 So.3d 673, 679. The purpose and intent of the class action procedure is to adjudicate and obtain res judicata effect on all common issues applicable not only to persons who bring the action, but also to alt others who are "similarly situated." Id. The burden of proving that the statutory class certification criteria have been satisfied belongs to the party seeking to maintain the class action. Id. at 682.
The requirements for a class action in Louisiana are set forth in La. C.C.P. art. 591, which when extensively revised in 1997 essentially adopted current federal law and codifed the Louisiana Supreme Court's class certification jurisprudence. See Dupree , 51 So.3d at 678-79. Article 591A provides that a class action must meet five threshold prerequisites, often referred to as numerosity, commonality, typicality, the adequacy of representation, and an objectively definable class. Dupree , 51 So.3d at 679. In addition to these five prerequisites, Article 59IB lists additional criteria, depending on the type of class action sought by the parties. One of the criteria is that the prosecution of separate actions by or against individual members of the class would create a risk of inconsistent or varying adjudications that would establish incompatible standards of conduct for the party opposing the class. La. C.C.P. art. 591B(1)(a).
See La. Acts 1997, No. 839, § 1.
In this case, plaintiffs sought to maintain the action as a class action and, therefore, in addition to proving the elements of numerosity, commonality, typicality, the adequacy of the representation, and an objectively definable class, they also had the burden of proving that the prosecution of separate actions by or against individual members of the class would create a risk of inconsistent or varying adjudications that would establish incompatible standards of conduct for DOR.
In concluding plaintiffs had not met their burden on this criterion, BTA stated, "all members of the class have access to a statutory scheme set up by the [l]egislature that they must follow in order to get a refund. All such claims for refund would be dealt with by the Secretary [of DOR] with an appeal to [BTA]."
Article 591B(1)(a) is concerned with the interests of potential defendants and exists for the benefit of potential defendants where there is a serious risk of irreconcilable results if separate actions were to be pursued. There must, however, be a real risk that separate actions will occur; there is no danger of courts fashioning different, incompatible standards without the risk of separate actions. This class action requirement can fairly be viewed as analogous to concursus actions or, in federal law, interpleader actions, i.e., it brings claimants together to litigate in one action their conflicting claims against a common defendant.Generally, if the threatened inconsistency is the possibility of inconsistent liability judgments, as where the defendant is required to pay money damages to one plaintiff but not to another, or where there is some lingering risk of subsequent adverse judgments, the purpose underlying Article 591B(1)(a) is not met. For example, certification is not appropriate when the threatened inconsistency is that the defendant might be ordered to pay damages in one lawsuit but not another. Thus, Article 591B(1)(a) classes are only appropriate where the defendant will truly be in a "conflicted position," wherein different results that would directly impair the defendant's ability to pursue a uniform course of conduct are likely. See Lambert, "Certification of Class Actions in Louisiana," 58 La. Law Rev. 1085, 1098 (explaining the federal counterpart to Article 591B(l)(a) set forth in Federal Rule of Civil Procedure 23(b)(1)(A) ).
Concursus is a procedural device through which two or more persons having competing or conflicting claims to money, property, or mortgages or privileges on property may be required to assert their respective claims contradictorily in a single proceeding. The common law equivalent is interpleader, available in federal court by special statute (statutory interpleader) and by Federal Rule of Civil Procedure 22 (rule interpleader). By invoking concursus, a potential judgment debtor may avoid multiple liability for the same debt and may cumulate two or more conflicting claims against him in the same forum. La. C.C.P. arts. 4651 through 4662 govern concursus proceedings. See 1A Frank L. Maraist, Louisiana Civil Law Treatise , Civil Procedure -- Special Proceedings § 1.7 (2012 ed.).
In "Certification of Class Actions in Louisiana," Lambert explains that the classic example of an action meeting this criterion for class action certification is a suit by a group of patent licensees challenging the underlying patent. See 58 La. Law Rev. 1085, 1098.
Federal Rule of Civil Procedure 23(b)(1)(A) provides in pertinent part, "A class action may be maintained if ... prosecuting separate actions by or against individual class members would create a risk of ... inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class."
Initially, we note the BTA judgment correctly stated that any denial of relief by DOR to a taxpayer is appealable to BTA. See La. R.S. 47:1625. Thus, application of the determination of the propriety of DOR's action in denying relief would be, in the first instance of review, uniform since it would be through BTA, the board legislatively created to "act as an appeal board to hear and decide, at a minimum of expense to the taxpayer, questions of law and fact arising from disputes or controversies between a taxpayer and the collector of revenue of the State of Louisiana in the enforcement of any tax, excise, license, permit or any other tax law administered by the collector." See La. R.S. 47:1401. And while, as the district court indicated in its lengthy oral reasons, judicial review of BTA determinations could ostensibly be at any of the district courts throughout the State and suggested the possibility of inconsistent liability determinations on appeal by the respective courts that is not the concern of the requirement of Article 591B(1)(a) as we have already noted.
See La. R.S. 47:1434-1436 and 1438.
In their petition, plaintiffs have alleged that DOR failed to pay and/or underpaid the interest due on their tax refunds, as well as on those of other Louisiana taxpayers entitled to refunds. La. R.S. 47:1624A provides that, notwithstanding any other provision of law to the contrary, on all refunds or credits, the DOR secretary "shall compute and allow as part of the refund or credit," interest set at an annual rate (established by statute) from "the date the return was due, the date the first return for that tax period was filed, or the date the tax was paid, whichever is later." Based on the allegations of plaintiffs' petition, the primary issue that DOR will have to defend against would be whether a plaintiff has met the requisite criteria. Thus, DOR is not the type of "party opposing the class" that would find itself in a conflicted position if the action is not maintained as a class action, i.e., one where if it would have to defend individual suits, its ability to pursue a uniform course of conduct would be impeded.
Indeed, at the hearing held on September 14, 2010, plaintiffs advised BTA in response to questions posited by member Anthony Graffia, "[a]bsolutely," on the merits of the case, "the issue is going to by pretty simple"; and that "[r]ight," the issues would be whether a claimant received a refund from DOR; did they pay him interest; and, if they did not, as a matter of law, should they have.
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Accordingly, BTA correctly applied the law and adhered to the correct procedural standards in denying certification on this basis. The district court erred in concluding that plaintiffs met their burden of establishing the criterion of Article 591B(1)(a). As such, it is unnecessary for us to review whether plaintiffs have demonstrated on this record that the requirements of numerosity, commonality, typicality, the adequacy of representation, and an objectively definable class have been established as mandated by Article 591A, and we pretermit such a discussion.
DECREE
For these reasons, the district court's judgment, reversing BTA's denial of certification of plaintiffs' action as a class action and defining the class as "All persons who are or were entitled to refunds and/or credits for overpayment of Louisiana State income taxes and were not paid interest as provided by law," is reversed. We reinstate that portion of the BTA judgment that denies, for reasons consistent with this opinion, plaintiffs' motion to certify their action as a class action. The matter is remanded to BTA for further proceedings. Appeal costs are assessed against plaintiffs, Michael X. St. Martin, Louis Roussel, III, and William Neilson.
REVERSED; BOARD OF TAX APPEALS JUDGMENT REINSTATED IN PART; REMANDED TO BOARD OF TAX APPEALS. MICHAEL X. ST. MARTIN, LOUIS ROUSSEL, III, WILLIAM A. NEILSON, ET AL VERSUS STATE OF LOUISIANA; AND CYNTHIA BRIDGES, IN HER CAPACITY AS SECRETARY OF THE LOUISIANA DEPARTMENT OF REVENUE
NUMBER 2012 CA 0373
BEFORE: KUHN, PETTIGREW, AND MCDONALD, JJ. PETTIGREW, CONCURS, AND ASSIGNS REASONS.
I concur with the majority. I further note that I personalty agree with the concurring opinion of Judge Parro, in St. Martin v. State, 2008-1403 (La.App. 1 Cir. 3/27/09), 5 So.3d 1060 (Table), that the use of a class action procedure is not specifically granted to the BTA and would run afoul of the Separation of Powers Doctrine, provided in La. Const. Art. II, Section 2. However, I am constrained to follow the holding of St. Martin v. State, 2009-0935 (La. 12/1/09), 25 So.3d 736 (concluding that BTA had jurisdiction to certify and hear class action lawsuits).