871 F.3d 1067
9th Cir.2017Background
- Gilbert Hyatt was assessed ~$7.4 million (1991–1992 taxes, penalties, interest); with 3% daily compounding interest the claimed liability exceeded $55 million when he sued.
- Hyatt contends he was a Nevada resident in 1991–1992 and that California tax authorities unconstitutionally targeted him; he alleges administrative delay caused loss of evidence and denial of due process.
- Hyatt pursued California’s protest-then-pay administrative route (filed protests and an appeal to the State Board of Equalization); his administrative appeal has been pending for many years (appeal filed 2008 and still unresolved at time of opinion).
- While administrative proceedings remained pending, Hyatt sued in federal district court under 42 U.S.C. § 1983 to enjoin assessment/collection and to stop the administrative process.
- The district court dismissed for lack of jurisdiction under the Tax Injunction Act (TIA); the Ninth Circuit affirmed, holding a "plain, speedy and efficient" state remedy (the pay-then-protest refund process) remained available to Hyatt.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TIA bars federal suit because a plain, speedy, efficient state remedy exists | Hyatt: He cannot be forced to switch to pay-then-protest; TIA should not bar his federal suit | Defs: California refund (pay-then-protest) remedy is plain, speedy, efficient and available | Held: TIA bars suit; pay-then-protest remains available so federal court lacks jurisdiction |
| Whether requiring pay-then-protest is an unconstitutional "bait-and-switch" | Hyatt: Reich/Newsweek protect taxpayers from states removing postpayment remedies; forcing payment to pursue constitutional claims is unfair | Defs: No bait-and-switch here because the state did not remove a postpayment remedy; Hyatt chose protest-then-pay | Held: No bait-and-switch; pay-then-protest is genuinely available, so Reich/Newsweek do not save Hyatt's federal suit |
| Whether prolonged administrative delay makes state remedy not "speedy" | Hyatt: Appeals Board delay (since 2008) means no speedy remedy; federal relief needed | Defs: Even if protest-then-pay has been slow, pay-then-protest yields a state-court action within six months if Board fails to act | Held: Remedy remains speedy because pay-then-protest can reach state court within six months; alleged administrative delay does not defeat availability |
| Whether Hyatt can raise his constitutional claims in a pay-then-protest refund action | Hyatt: Statutory limits and refund-claim wording may prevent adding post-protest constitutional claims | Defs: California courts and the Board likely will permit constitutional claims as refund grounds or allow amendment; Tax Board had actual notice given long litigation history | Held: Court concluded California courts would likely treat Hyatt's constitutional claims as proper refund grounds or allow amendment; remedy is plain |
Key Cases Cited
- Reich v. Collins, 513 U.S. 106 (1994) (per curiam) (state may not unfairly remove a postpayment refund remedy after taxpayer relied on it — no bait-and-switch allowed)
- Newsweek, Inc. v. Florida Dept. of Revenue, 522 U.S. 442 (1998) (where a state eliminated a postpayment remedy on which taxpayer relied, due process required access to refund procedures)
- Rosewell v. LaSalle Nat'l Bank, 450 U.S. 503 (1981) (describing TIA's purpose and the requirement that state remedies meet minimal procedural criteria)
- Franchise Tax Bd. of Cal. v. Alcan Aluminium Ltd., 493 U.S. 331 (1990) (recognizing TIA as a broad jurisdictional barrier to federal interference in state tax collection)
- Jerron West, Inc. v. State of Cal., State Bd. of Equalization, 129 F.3d 1334 (9th Cir. 1997) (confirming California refund procedures generally satisfy the TIA's plain, speedy, efficient standard)