IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
NEW CINGULAR WIRELESS PCS NO. 70810-4-1
LLC, a Delaware limited liability
company, DIVISION ONE
Respondent, C3 .—IC
UNPUBLISHED OPINION
v.
rv-'
THE CITY OF BOTHELL,
WASHINGTON,
FILED: August 25, 2014
Petitioner, en
CITIES 1 through 100+,
Defendants.
Leach, J. — On discretionary review, we must decide if the trial court
applied equitable tolling properly to New Cingular Wireless PCS LLC's claim for a
tax refund from the city of Bothell (City).1 The trial court concluded that New
Cingular's filing of an administrative tax refund claim with the City tolled the
statute of limitations for separate claims asserted in a lawsuit New Cingular filed
1 New Cingular initially sued more than 100 cities in this action. On March
14, 2013, the trial court granted various defendants' motion for misjoinder and
dismissed without prejudice all defendant cities except Bothell. Including each
name in the caption of this opinion would take several pages. In the interest of
publishing economy, we order the abbreviation of the caption to that set forth
above for purposes of this opinion and any postopinion pleadings filed in an
appellate court only.
NO. 70810-4-1/2
later in superior court. Because New Cingular failed to exhaust its administrative
remedies before filing its superior court action, we reverse and remand.
FACTS
New Cingular provides telecommunications services and sells wireless
data plans. The data plans allow customers to access the Internet on personal
electronic devices. New Cingular paid to the City utility taxes on revenues from
its provision of these Internet services. New Cingular billed for and collected
from its customers these tax payments.
In 2010, New Cingular's customers in Washington sued AT&T in federal
court, alleging that AT&T unlawfully charged them for utility taxes on Internet
services.2 The United States Judicial Panel on Multidistrict Litigation
consolidated this action with 27 other lawsuits from around the country.3 AT&T
settled these lawsuits, agreeing to seek refunds on the Internet taxes that it paid
to the various taxing jurisdictions, including the City, and to return any refunded
taxes to the class members.4
2 Vickerv v. AT&T Mobility LLC, No. 2:10-CV-0257 (W.D. Wash. 2010).
New Cingular is an affiliate of AT&T.
3 In re AT&T Mobility Wireless Data Servs. Sales Tax Litiq., 789 F. Supp.
2d 935, 939 (N.D. 111.2011).
4 AT&T, 789 F. Supp. 2d at 940-41.
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In November 2010, New Cingular filed with the City a refund request for
$416,802.28 in alleged overpayment of utility taxes for the period November 1,
2005, through September 30, 2010. On January 13, 2012, New Cingular, by
letter, asked the City about the status of its tax refund claim. On April 16, 2012,
the City sent a letter to New Cingular denying its refund claim.
On June 15, 2012, New Cingular wrote a letter to the City stating, "[l]n the
months since that process was undertaken, the company has identified certain
tax amounts that should not be included in the amount sought in the Refund
Claim." Accordingly, New Cingular proposed reductions in the requested refund
amounts.
Earlier, on April 25, 2012, New Cingular sued the City in King County
Superior Court seeking "a declaration that Defendants have an obligation to
refund the erroneously collected tax on Internet access." It also sought recovery
of its tax payments on theories of unjust enrichment and violation of the due
process clauses of the Fourteenth Amendment to the United States Constitution
and the Washington State Constitution.5 On July 5, 2013, the City moved for
partial summary judgment, seeking a decision that "the doctrine of equitable
tolling does not apply to this action" and that the statute of limitations barred New
Cingular's claims for recovery of taxes paid before April 25, 2009, three years
5 New Cingular amended its complaint on August 21, 2012.
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before New Cingular filed this lawsuit. In response, New Cingular argued, "[T]he
refund application should toll the statute of limitations because Bothell acted in
bad faith by failing to timely process the refund claim, despite its code provisions
which require 'prompt' review, while New Cingular diligently pursued its claim."
The trial court denied the City's motion and, without any motion requesting
this relief, granted partial summary judgment in favor of New Cingular. The
court's order states, "The doctrine of equitable tolling applies under the
circumstances of this case, commencing upon the filing of the tax refund claim
with the City of Bothell in November 2010. Denial of the refund claim was not
necessary for accrual of the cause of action for unjust enrichment." The court
also stated, "The court acknowledges that its decision is an extension of the
current Washington case law on equitable tolling."
On August 22, 2013, the trial court certified under RAP 2.3(b)(4) "that the
order denying summary judgment entered on August 2, 2013 involves a
controlling question of law as to which there is substantial ground for a difference
of opinion and that immediate review of the order may materially advance the
ultimate termination of the litigation."
The City sought discretionary review, which this court granted.
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STANDARD OF REVIEW
We review de novo a trial court's summary judgment decision.6 In this
review, we construe all facts and reasonable inferences from those facts in the
light most favorable to the losing party.7 The prevailing party bears the burden of
showing that no material issue of fact exists.8 A fact is material if the outcome of
the litigation depends upon it.9
ANALYSIS
Washington courts apply a three-year statute of limitations to tax refund
claims.10 "The limitation period commences when a cause of action accrues and
tolls when a complaint is filed or a summons is served."11 An action for a tax
refund accrues when the plaintiff pays the challenged taxes.12
The doctrine of equitable tolling "permits a court to allow an action to
proceed when justice requires it, even though a statutory time period has
6 Young v. Savidqe. 155 Wn. App. 806, 814, 230 P.3d 222 (2010) (citing
Aba Sheikh v. Choe, 156 Wn.2d 441, 447, 128 P.3d 574 (2006)).
7 Savidqe. 155 Wn. App. at 814 (citing Hertoq v. City of Seattle, 138
Wn.2d 265, 275, 979 P.2d 400 (1999)).
8 Savidqe, 155 Wn. App. at 814 (citing Young v. Key Pharm., Inc., 112
Wn.2d 216, 225, 770 P.2d 182 (1989)).
9 Savidqe, 155 Wn. App. at 814 (citing Balise v. Underwood, 62 Wn.2d
195, 199,381 P.2d 966 (1963)).
10 RCW 4.16.080(3); Cost Mqmt. Servs.. Inc. v. City of Lakewood, 178
Wn.2d 635, 651, 310 P.3d 804 (2013); Hart v. Clark County, 52 Wn. App. 113,
116, 758 P.2d 515 (1988).
11 U.S. Oil & Refining Co. v. Dep't of Ecology, 96 Wn.2d 85, 91, 633 P.2d
1329(1981).
12 Hart, 52Wn.App. at 117.
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NO. 70810-4-1/6
elapsed."13 Justice generally requires equitable tolling in cases involving a
defendant's bad faith, deception, or false assurances and the plaintiff's exercise
of diligence.14 The party asserting equitable tolling bears the burden of proof.15
Courts apply equitable tolling sparingly.16 "In Washington equitable tolling
is appropriate when consistent with both the purpose of the statute providing the
cause of action and the purpose of the statute of limitations."17
Bothell Municipal Code (BMC) 5.08.110 states,
If, upon application by a taxpayer for a refund or for an audit of his
records, or upon an examination of the returns or records of any
taxpayer, it is determined by the treasurer that within the two years
immediately preceding the receipt by the city of the application by
the taxpayer for a refund or for an audit, or, in the absence of such
an application, within the two years immediately preceding the
commencement by the city treasurer of such examination, a tax has
been paid in excess of that properly due, the excess amount paid
within such period of two years shall be credited to the taxpayer's
account or shall be refunded to the taxpayer, at his option. No
refund or credit shall be allowed with respect to any payments
made to the city more than two years before the date of such
application or examination.
BMC 5.08.210 states,
13 In re Pers. Restraint of Bonds, 165 Wn.2d 135, 141, 196 P.3d 672
(2008) (citing In re Pers. Restraint of Carlstad, 150 Wn.2d 583, 593, 80 P.3d 587
(2003)).
14 Millavv.Cam, 135 Wn.2d 193, 206, 955 P.2d 791 (1998).
15 City of Bellevue v. Benvaminov, 144 Wn. App. 755, 767, 183 P.3d 1127
(2008).
16 Graham Neigh. Ass'n v. F.G. Assoc, 162 Wn. App. 98, 119, 252 P.3d
898 (2011) (citing Nikum v. City of Bainbridqe Island, 153 Wn. App. 366, 378,
223P.3d 1172(2009)).
17 Millav, 135Wn.2dat206.
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NO. 70810-4-1/7
Any person having paid any tax, original assessment, additional
assessment, or corrected assessment of any tax may apply to the
treasurer within the time limitation for refund provided in this
chapter by petition in writing for a correction of the amount paid and
a conference for examination and review of the tax liability, in which
petition he shall set forth the reasons why the conference should be
granted, and the amount in which the tax, interest, or penalty
should be refunded. The treasurer shall promptly consider the
petition, and may grant or deny it. If denied, the petitioner shall be
notified by mail thereof forthwith. If a conference is granted, the
treasurer shall notify the petitioner by mail of the time and place
fixed therefor. After the hearing, the treasurer may make such
determination as may appear to him just and lawful, and shall mail
a copy of his determination to the petitioner.
BMC 5.08.240(A) states,
The city treasurer or his duly authorized agent may examine any
books, papers, records, or other data bearing upon the amount of
any tax payable or upon the correctness of any return, or for the
purpose of making a return where none has been made, or in order
to ascertain whether a return should be made. The city manager
may require the attendance of any person at a time and place fixed
in a notice served by any person in the same manner as a
subpoena is served in a civil case.
The treasurer's decision is final unless the petitioner timely appeals to the
city council.18 If the city council orders a public hearing on this appeal, it votes to
affirm, modify, or reverse the treasurer's decision.19 The city council's decision is
final unless the petitioner files an action in superior court "for a trial de novo on
the matter at issue."20
18 BMC 5.08.220.
19 BMC 5.08.220.
20 BMC 5.08.230.
NO. 70810-4-1/8
New Cingular claims that equitable tolling applies. It alleges that the City
acted in bad faith with its "delay in processing the claim" and "by its failure to
describe how the detailed claim that New Cingular submitted was supposedly
insufficient, its failure to ask for more information, and its lack of contact with New
Cingular in any way prior to Bothell's summary, generic denial." New Cingular
also alleges that the City provided false assurances:
Bothell's Municipal Code provided false assurances in two
ways: first, by providing that Bothell would "promptly" process the
claim, BMC 5.08.210, and, second, by representing any
overpayment in taxes "shall be refunded" to the taxpayer. BMC
5.08.110. New Cingular relied on both representations when it
pursued its administrative claim. Waiting 17 months to respond is
not prompt, and Bothell has flouted its obligation to repay the funds
it wrongfully possesses.
New Cingular asserts that it "diligently pursued its claim by seeking redress
through the administrative process and then filing suit promptly after Bothell sent
its summary denial."
New Cingular claims that our Supreme Court's decision in Qwest Corp. v.
City of Bellevue21 supports its argument: "Because the trial court shared original
jurisdiction with Bothell over the tax refund claim, the trial court did not operate in
an appellate capacity, and administrative exhaustion requirements did not apply."
We disagree and distinguish Qwest.
21 161 Wn.2d 353, 166 P.3d 667 (2007).
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NO. 70810-4-1/9
In Qwest, a telephone service provider challenged Bellevue's imposition of
a utility occupation tax.22 Qwest filed a superior court action before Bellevue
assessed its tax against Qwest.23 After Bellevue issued its tax assessment,
Qwest challenged it under the Bellevue Municipal Code with the city's hearing
examiner.24 Bellevue appealed the trial court's denial of its motion to dismiss the
lawsuit on the grounds that Qwest had failed to exhaust its administrative
remedies. Our Supreme Court affirmed the trial court, concluding that a party is
not required to exhaust administrative remedies where the superior court has
original jurisdiction and the party seeks to invoke the court's original, rather than
appellate, jurisdiction.25 The court also noted that "questions of statutory
interpretation need not be referred to administrative agencies."26 And it
explained that the case involved "issues of broad public import which require
prompt and ultimate determination."27
Here, New Cingular first filed a refund application with the City and then
abandoned the administrative process before filing a separate superior court
action. This case does not involve an issue of statutory interpretation. New
22 Qwest, 161 Wn.2dat356.
23 Qwest, 161 Wn.2dat357.
24 Qwest, 161 Wn.2dat357.
25 Qwest, 161 Wn.2dat371.
26 Qwest, 161 Wn.2dat371.
27 Qwest, 161 Wn.2dat371.
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NO. 70810-4-1/10
Cingular does not challenge the City's authority to impose a tax but argues that it
"inadvertently" paid the taxes at issue. Qwest is not applicable here.
New Cingular fails to show that justice requires equitable tolling. In Cost
Management Services. Inc. v. City of Lakewood,28 decided after the trial court in
this case denied the City's motion for summary judgment, our Supreme Court
held, "A superior court's original jurisdiction over a claim does not relieve it of its
responsibility to consider whether exhaustion should apply to the particular claim
before the court." In Cost Management Services, a natural gas purchasing agent
sought a refund from Lakewood of taxes allegedly paid in error.29 Cost
Management Services stopped paying the taxes and requested a refund.30 After
Lakewood failed to respond to its request, Cost Management Services filed a
lawsuit in superior court.31 The superior court concluded that the three-year
statute of limitations limited Cost Management Services' recovery to payments
made within three years of the date when it filed its lawsuit.32 Cost Management
Services then filed a separate superior court action seeking a writ of mandamus
compelling Lakewood to respond to its original refund request filed with the
28 178 Wn.2d 635, 648, 310 P.3d 804 (2013).
29 CostMomt-Servs., 178 Wn.2d at 639.
30 CostMgmt.Servs., 178 Wn.2d at 639.
31 CostMgmt.Servs., 178 Wn.2d at 639.
32 CostMgmt. Servs., 178 Wn.2d at 640.
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NO. 70810-4-1/11
City.33 The court consolidated these actions, granted the writ, and entered a
judgment in favor of Cost Management Services.34
Our Supreme Court began its review by explaining, "This court has long
applied 'the general rule that when an adequate administrative remedy is
provided, it must be exhausted before the courts will intervene.'"35 The court
recognized, "The primary question in exhaustion cases ... is whether the relief
sought can be obtained through an available administrative remedy; if so, the
party seeking relief must first seek relief through the administrative process."36
The court held, "[E]ven if original jurisdiction in a case lies with the superior court,
exhaustion of administrative remedies is still required."37
In Cost Management Services, the court also declined to base the running
of the statute of limitations for Cost Management Services' superior court claims
upon the time that it filed its administrative action.38 The court stated, "CMS
seeks mandamus for the express purpose of reaching back beyond the legal
33 Cost Mgmt. Servs., 178 Wn.2d at 640.
34 CostMgmt. Servs., 178 Wn.2d at 640.
35 Cost Mgmt. Servs., 178 Wn.2d at 641 (quoting Wright v. Woodard, 83
Wn.2d 378, 381, 518 P.2d 718 (1974)).
36 Cost Mgmt. Servs.. 178 Wn.2d at 642.
37 Cost Mgmt. Servs.. 178 Wn.2d at 646. The Supreme Court, however,
held that Cost Management Services was not required to exhaust administrative
remedies "because none were available." 178 Wn.2d at 652. Cost Management
Services filed a claim with the city for a refund, but the city did not respond. The
court concluded that "the administrative process available to CMS could not have
provided an adequate remedy." 178 Wn.2d at 645.
38 CostMgmt.Servs., 178 Wn.2d at 651.
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NO. 70810-4-1/12
statute of limitations."39 It determined, "In essence, CMS seeks to use the
administrative process to revive a claim otherwise barred by the three year
statute of limitations."40 Accordingly, the court concluded, "We do not think the
statute of limitations can be overcome by such a use of the administrative
process."41
Similarly, here, New Cingular cannot use the administrative process,
which it chose to abandon, to avoid the statute of limitations bar in its superior
court action. New Cingular does not show an inability to obtain the requested
relief through the administrative process. New Cingular provides a single
explanation for abandoning the City's administrative process—a claim that the
process was "hostile" and "demonstratively slow and futile." But the City's denial
of New Cingular's application at the first stage of the administrative process did
not mean that New Cingular could not have obtained the relief sought by
completing this process, which included the opportunity for a trial de novo.42
Because New Cingular failed to exhaust administrative remedies, the trial court
should not have applied equitable tolling to allow it to "revive a claim otherwise
barred by the three year statute of limitations."
39 CostMgmt.Servs., 178 Wn.2d at 652.
40 CostMgmt.Servs., 178 Wn.2d at 651.
41 Cost Mgmt. Servs., 178 Wn.2d at 652.
42 BMC 5.08.230.
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NO. 70810-4-1/13
CONCLUSION
Because New Cingular failed to exhaust its administrative remedies before
filing its superior court action, equitable tolling does not apply to the claims it
asserted in superior court. The statute of limitations bars recovery of all
payments made more than three years before the filing of this lawsuit. We
reverse and remand for proceedings consistent with this opinion.
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WE CONCUR:
IztX.J
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