Botney

The State of California imposes a sales tax on the purchase of merchandise by means of trading stamps, coupons, and the like. Beginning in 1961, Sperry and Hutchinson Company (S&H) collected sales tax reimbursements from stamp redeemers for merchandise obtained with its S&H Green Stamps on a valuation of $3 per book of 1,200 stamps, and it paid sales tax to the state on the basis of the same valuation. In 1971 Eleanor Botney and Thelma Daar, alleging that S&H overvalued the stamps in calculating the tax, brought a class action on behalf of an estimated 1.5 million California stamp redeemers against S&H for declaratory and injunctive relief and for damages for fraud and overcollection of sales tax reimbursements. S&H cross-complained against the State Board of Equalization for declaratory relief and indemnification in the event plaintiffs prevailed in the class action.

The trial court concluded: the action was a proper and manageable class action; plaintiffs failed to prove fraud and were barred by laches from claiming damages more than three years prior to the filing of their complaint; the collection of sales tax reimbursements by S&H was valid, lawful, and reasonable;…