Wednesday, February 26, 2014

Standing Up for Associational Taxpayer Standing

Gilbane Building Company v. Superior Court, No. D063685 (D4d1 Jan. 23, 2014)

A community group brought a taxpayer suit against a contractor that had done business with a school district, alleging various causes of action to the effect that the contractor had made improper gifts to district officials in order to win the contracts. The contractor demurred, challenging the community group’s standing to sue on the grounds that it was not itself a district taxpayer, that its lawsuit was usurping the district’s discretionary functions and that it had not made a demand that the district sue on its own behalf. The trial court denied the demurrer and the contractor sought writ review.

Although it takes up the writ, the court of appeal denies relief. Citing to a recent case from the same division, Taxpayers for Accountable Sch. Bond Spending v. San Diego Unified Sch. Dist., 215 Cal. App. 4th 1013, 1031–1033 (2013), the court of appeal holds that an association has standing to bring a taxpayer action under Code of Civil Procedure § 526a, provided some of its members have standing to sue on their own behalf, even if the association itself does not pay taxes. And the rule prohibiting taxpayers from usurping a public agency’s discretion through taxpayer suits is inapplicable. Assuming that the complaint’s allegations that the district had expended funds illegally are true—as required on a demurrer—the contracts are void, not merely voidable. Under those circumstances, action by the district is mandatory; its governmental discretion is not implicated. Finally, requiring a demand would be futile, as district officials were alleged to be participants in the wrongdoing. It is doubtful that they would initiate a lawsuit to correct their own malfeasance. And even if a demand were required, the community group’s notification to the district that it intended to bring suit was sufficient to put the district on notice and to permit the district an opportunity to commence an action on behalf of its constituents.  If actual refusal of a demand were a requirement, a public agency could simply forestall taxpayer litigation by refusing to respond to a demand.

Writ denied.

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