Rea Paeste v. Government of Guam

Like many state, local, and territorial jurisdictions, Guam has struggled for years with chronic budget deficits. Guam settled on a unique solution to its financial problems: It refused to refund over-withheld income taxes, using the money to fund government spending. Confronted with meritorious and uncontested claims for tax refunds, Guam did not issue the refunds, often for several years at a time.

Apparently recognizing that some Guam taxpayers desperately needed their excess tax payments — to which the Guam government has no legal claim — Guam established an “expedited refund” process. Purportedly, taxpayers facing, for example, medical or funeral expenses, would move to the front of the line and be granted refunds without waiting for Guam to make good on the huge backlog of claims. In practice, the expedited refund process was effectively standardless, and it devolved into arbitrariness and favoritism.

A group of Guam taxpayers brought this class-action suit against Guam and several of its officers in their official capacities. The taxpayers alleged that Guam violated the tax provisions of the Organic Act of Guam, 48 U.S.C. § 1421i, by failing timely to refund…