In re Cnty. Inmate Tel. Serv. Cases

• Decision Date: 28 April 2020
• Docket Number: B291341
• Citation: 48 Cal.App.5th 354,262 Cal.Rptr.3d 1
• Court: California Court of Appeals Court of Appeals
• Parties: COUNTY INMATE TELEPHONE SERVICE CASES.

48 Cal.App.5th 354

262 Cal.Rptr.3d 1

COUNTY INMATE TELEPHONE SERVICE CASES.

B291341

Court of Appeal, Second District, Division 1, California.

Filed April 28, 2020

Kaye, McLane, Bednarski & Litt, Barrett S. Litt, Ronald O. Kaye, Pasadena; Rapkin & Associates, Michael S. Rapkin, Woodland Hills, and Scott B. Rapkin, Santa Monica, for Plaintiffs and Appellants.

Jonathan M. Coupal, Timothy A. Bittle, Sacramento and Laura E. Dougherty, for Howard Jarvis Taxpayers Association as Amicus Curiae on behalf of Plaintiffs and Appellants.

Schonbrun Seplow Harris & Hoffman and Catherine Sweetser, Los Angeles, for Human Rights Defense Center, Public Counsel, American Civil Liberties Union of Southern California, Worth Rises, Prison Law Office, and Impact Fund as Amici Curiae on behalf of Plaintiffs and Appellants.

Lewis Brisbois Bisgaard & Smith, Raul L. Martinez and Ryan D. Harvey, Los Angeles, for Defendants and Respondents Counties of Los Angeles, Orange, San Bernardino, Ventura, Alameda and Santa Clara.

James R. Williams, County Counsel (Santa Clara), and Michael Leon Guerrero, Deputy County Counsel, for Defendant and Respondent County of Santa Clara.

Arias & Lockwood, Christopher D. Lockwood ; Lewis Brisbois Bisgaard & Smith, John M. Porter and Arthur K. Cunningham for Defendant and Respondent County of Riverside.

Sharon L. Anderson, County Counsel (Contra Costa) and D. Cameron Baker, Deputy County Counsel, for Defendant and Respondent County of Contra Costa.

Wagstaffe, Von Loewenfeldt, Busch & Radwick, Michael Von Loewenfeldt, San Francisco, Frank Busch ; John C. Beiers, County Counsel (San Mateo) and David Silberman, Chief Deputy County Counsel, for Defendant and Respondent County of San Mateo.

Thomas E. Montgomery, County Counsel (San Diego), Joshua Heinlein and Jeffrey P. Michalowski, Senior Deputy County Counsel, for California State Association of Counties and League of California Cities as Amici Curiae on behalf of Defendants and Respondents.

GRIMES, J.^*

SUMMARY

In this coordinated proceeding, inmates in county jails in nine California counties challenge the exorbitant commissions paid by telecommunications companies to the nine counties under contracts giving the telecommunications companies the exclusive right to provide telephone service for the inmates. The telecommunications companies pass on the cost of the commissions to the inmates and their families in the fees charged to use the inmate calling system, the only telephone system available to them. The phone rates would be significantly lower if they did not include charges to recoup the commissions paid to the counties. The rates are not related to the cost of the services provided.

The inmates say these fees are unlawful taxes under Proposition 26, which requires voter approval of "any levy, charge or exaction of any kind imposed by a local government" unless limited to the reasonable cost or value. ( Cal. Const., art. XIII C, § 1, subd. (e).) None of the commissions in the nine county contracts was approved by the voters. The inmates also allege the commissions violate several statutory provisions.

The trial court sustained a demurrer by the counties without leave to amend, ruling that plaintiffs do not have standing to contend the commissions are an unconstitutional tax, and that the other causes of action fail as well.

We agree with the trial court on all points and affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs are inmates in jail facilities in nine counties and their families. The nine counties are defendants. Each defendant county has contracted with a telecommunications company (these companies are not parties), giving the company the exclusive right to establish an inmate calling system in the respective county jails. The inmates must use that system, and relatives who wish to speak with them must establish a prepaid account with the telecommunications company. According to plaintiffs, their families "are charged unreasonable, unjust and exorbitant rates" in order to maintain contact with county inmates.

In exchange for the exclusive right to provide telephone service to inmates, the telecommunications company pays the defendants a guaranteed fee against an identified percentage of the inmate calling system charges. The rates charged to inmates are far greater than those paid for ordinary telephone service. The defendants’ share of the revenue collected from inmate calls is referred to as a "site commission," and in all cases is more than 50 percent of the revenue from inmate calls. Under a Los Angeles County agreement with its service provider, for example, the county is guaranteed the greater of $15 million annually or 67.5 percent of the revenues for specified charges described in the contract.

Plaintiffs filed this putative class action lawsuit "to put an end to this unconscionable practice by California counties." Plaintiffs allege the telecommunications companies make a substantial profit even after payment of the commissions; that without the commissions, the charges would be substantially lower; and the commissions are not based on the actual cost or reasonable value of the inmate calling service. Plaintiffs allege the full amount of the charges due to the counties is incurred by the customers of the telecommunications company, and not by the telecommunications company itself.

Plaintiffs acknowledge defendants have complied with Penal Code section 4025, which specifies that the commissions described in plaintiffs’ complaint be deposited in an inmate welfare fund. "There shall be deposited in the inmate welfare fund any money, refund, rebate, or commission received from a telephone company or pay telephone provider when the money, refund, rebate, or commission is attributable to the use of pay telephones which are primarily used by inmates while incarcerated."¹ ( Pen. Code, § 4025, subd. (d).)

Plaintiffs allege the commissions are actually an unlawful tax in violation of the California Constitution. Because none of the commissions was approved by voters, plaintiffs say they are entitled to a refund of the illegal taxes.

Plaintiffs say the jail population is disproportionately composed of African-Americans and Latinos, as well as persons with mental illnesses or substance abuse problems, compared to the overall population of the respective counties. The telephone charges that provide the source of the commissions received by defendants, and consequently the commissions, have a disparate impact on African-Americans and Latinos, in violation of Government Code section 11135.

Further, plaintiffs allege defendants have violated the Tom Bane Civil Rights Act ( Civ. Code, § 52.1, the Bane Act) because the commissions unlawfully deprive plaintiffs of their rights through intimidation, threat or coercion.²

Defendants demurred to the complaint. As noted at the outset, the trial court sustained the demurrer without leave to amend.³ The court entered judgment on June 6, 2018, and plaintiffs filed a timely notice of appeal.⁴

DISCUSSION

A demurrer tests the legal sufficiency of the complaint. We review the complaint de novo to determine whether it alleges facts sufficient to state a cause of action. For purposes of review, we accept as true all material facts alleged in the complaint, but not contentions, deductions or conclusions of fact or law. We also consider matters that may be judicially noticed. When a demurrer is sustained without leave to amend, "we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm." ( Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.) Plaintiff has the burden to show a reasonable possibility the complaint can be amended to state a cause of action. ( Ibid. )

1. Proposition 26 and the Standing Issue

The trial court ruled, and we agree, that plaintiffs do not have standing to contend the commissions are an unconstitutional tax.

All taxes imposed by any local government are subject to voter approval. ( Cal. Const., art. XIII C, § 2.) Proposition 26, adopted in 2010, expanded the definition of a tax. A "tax" now includes "any levy, charge, or exaction of any kind imposed by a local government," with seven exceptions.⁵ (Id., § 1, subd. (e).) The local government has the burden of proving, among other things, "that a levy, charge, or other exaction is not a tax ...." (Id., § 1, subd. (e), final par.)

The general rule is that a person may not sue to recover excess taxes paid by someone else, "who pays the tax by design or mistake." ( Grotenhuis v. County of Santa Barbara (2010) 182 Cal.App.4th 1158, 1165, 105 Cal.Rptr.3d 918 ; id. at pp. 1164-1165, 105 Cal.Rptr.3d 918 [the plaintiff could not sue to recover excess property taxes paid by a corporation of which he was the sole owner and from which he leased the property; section 5140 of the Revenue and Taxation Code allows only the person who paid the tax to bring a tax refund action].) There may be unusual circumstances that permit an exception to the general rule (as we discuss, post ). But we know of no case where a person who has not paid the tax to the taxing authority, and who has no legal responsibility to do so, has been found to have standing to seek a refund of the tax. We find no merit in any of the arguments plaintiffs make in support of a contrary conclusion.

Plaintiffs proffer several contentions.

First, plaintiffs say they "actually paid the illegal tax, not the providers," so "the ‘general rule’ requires that plaintiffs have standing to obtain a refund." Plaintiffs paid nothing to the counties, and they had no legal responsibility to pay anything to the counties. Simply asserting that they effectively or indirectly "paid the illegal tax" does not make it true. Plaintiffs may have paid exorbitant charges to the telephone provider , but they did not make any payment to the c...