Gilbert Hyatt v. Betty Yee

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

GILBERT P. HYATT, No. 15-15296

Plaintiff-Appellant,

D.C. No.

v. 2:14-cv-00849-

GEB-DAD

BETTY T. YEE, in her official

capacity as California Franchise Tax

Board member and California State OPINION

Board of Equalization member;

DIANE L. HARKEY, in her official

capacity as California State Board of

Equalization member; JEROME E.

HORTON, in his official capacity as

California Franchise Tax Board

member; MICHAEL COHEN, in his

official capacity as California

Franchise Tax Board member;

GEORGE RUNNER, in his official

capacity as California State Board of

Equalization member; FIONA MA, in

her official capacity as California

State Board of Equalization member

and Franchise Tax Board member,

Defendants-Appellees.

Appeal from the United States District Court

for the Eastern District of California

Garland E. Burrell, Jr., District Judge, Presiding

2 HYATT V. YEE

Argued and Submitted February 17, 2017

San Francisco, California

Filed September 26, 2017

Before: William A. Fletcher, Julio M. Fuentes, * and

Johnnie B. Rawlinson, Circuit Judges.

Opinion by Judge Fuentes

SUMMARY **

Tax / Civil Rights

The panel affirmed the district court’s dismissal of

plaintiff’s action, brought under 42 U.S.C. § 1983, arising

from his contested administrative proceedings of a

California Franchise Tax Board ruling that he owed close to

$7.4 million in taxes, penalties and interest.

Plaintiff’s initial tax deficiency, compounding daily with

3% interest grew to over $55 million at the time he filed his

complaint in this case. The taxes were assessed on income

plaintiff earned during the 1991 and 1992 tax years, during

which plaintiff alleges he had moved from California to

Nevada. Plaintiff alleged that he had been unconstitutionally

*

The Honorable Julio M. Fuentes, United States Circuit Judge for

the U.S. Court of Appeals for the Third Circuit, sitting by designation.

**

This summary constitutes no part of the opinion of the court. It

has been prepared by court staff for the convenience of the reader.

HYATT V. YEE 3

targeted and that so much time had passed in the

administrative review of his tax claims that he could no

longer receive due process. He asked the district court to

enjoin California from collecting this tax bill.

The panel agreed with the district court that the Tax

Injunction Act barred this suit because plaintiff had a plain,

speedy and efficient remedy for his claims. The panel noted

that a taxpayer seeking to contest his tax bill solely on the

basis that he was not a resident of California during the

disputed period has two options. He could either pay now

and litigate later, or bring his claim through a protest-then-

pay process, which allows him to delay paying the disputed

tax. A taxpayer who pays now and litigates later can bring

his claims to state court within six months, which guarantees

an expeditious route to the state courts on the taxpayer’s

liability. A taxpayer who initially challenges a residency-

based income tax assessment through the protest-then-pay

administrative process may elect to use the pay-then-protest

process at any point by paying the disputed tax, thus

guaranteeing a route to state court within six months.

The panel held that even though plaintiff in this case

chose to challenge his tax assessment through the protest-

then-pay process, he still had a plain, speedy, and efficient

remedy available because he could pursue the pay-then-

protest process. The panel rejected plaintiff’s claim that

requiring him to pay his accrued tax bill and switch remedies

in order to pursue his constitutional claims would be a bait

and switch in violation of his due process rights. The panel

further rejected plaintiff’s claim that he does not have access

to a speedy remedy because the Appeals Board has not

completed his administrative appeal, pending since 2008.

The panel held that the pay-then-protest remedy now

provides plaintiff with a speedy remedy, even if the protest-

4 HYATT V. YEE

then-pay remedy has not. Finally, the panel rejected

plaintiff’s claims that he would not be able to bring his

constitutional claims in a pay-then-protest proceeding.

COUNSEL

Erwin Chemerinsky (argued), UC Irvine School of Law,

Irvine, California; Donald J. Kula and Oliver M. Gold,

Perkins Coie LLP, Los Angeles, California; Malcolm Segal,

Segal & Associates PC, Sacramento, California; for

Plaintiff-Appellant.

Michael von Loewenfeldt (argued), Brady R. Dewar, and

James M. Wagstaffe, Kerr Wagstaffe LLP, San Francisco,

California; Seth P. Waxman (argued), Wilmer Cutler

Pickering Hale and Dorr LLP, Washington, D.C.; Debbie

Leonard, James Bradshaw, and Adam Hosmer-Henner,

McDonald Carano Wilson LLP, Reno, Nevada; Cynthia J.

Larsen, Katie DeWitt, and David W. Spencer, Orrick

Herrington & Sutcliffe LLP, Sacramento, California; for

Defendants-Appellees.

OPINION

FUENTES, Senior Circuit Judge:

For over 22 years, Plaintiff Gilbert Hyatt has contested

in administrative proceedings a California Franchise Tax

Board ruling that he owed close to $7.4 million in taxes,

penalties, and interest. This initial deficiency, compounding

daily with 3% interest, grew to over $55 million at the time

he filed his complaint in this case. The taxes were assessed

on income he earned during the 1991 and 1992 tax years,

HYATT V. YEE 5

during which Hyatt alleges he had moved from California to

Nevada. Finally, while his administrative proceedings were

still pending, Hyatt filed this suit in the district court,

claiming that he had been unconstitutionally targeted and

that so much time had passed in the administrative review of

his tax claims that he can no longer receive due process. He

asked the district court to enjoin California from collecting

this tax bill.

Because we agree with the district court that the Tax

Injunction Act bars it from “enjoin[ing], suspend[ing] or

restrain[ing] the assessment, levy or collection of [this] tax

under State law where,” as here, “a plain, speedy and

efficient remedy may be had” in the state court, we affirm

the judgment of the District Court.

BACKGROUND

California’s Statutory Tax Framework

Under California law, a taxpayer seeking to “prevent or

enjoin the assessment or collection of” a California

residency-based income tax may not file suit in state court

without first exhausting the administrative remedies set forth

in the California Revenue and Taxation Code. 1 In general, a

California taxpayer must “pay now, litigate later.” 2

However, a taxpayer seeking to contest his tax bill solely on

the basis that he was not a resident of California during the

disputed period has two options. The taxpayer may either

pay now and litigate later, or may bring his claim through a

1

Cal. Rev. & Tax. Code § 19381.

2

Sahadi v. Scheaffer, 155 Cal. App. 4th 704, 734 (2007) (“[A]

taxpayer may not obtain judicial review of the validity of a tax which is

due but has not been paid.”).

6 HYATT V. YEE

protest-then-pay process, which allows him to delay paying

the disputed tax. There is a significant difference: a taxpayer

who pays now and litigates later can bring his claims to state

court within six months, which guarantees an expeditious

route to the state courts on the taxpayer’s liability. A

taxpayer who disputes his residency through the protest-

then-pay process, however, must wait until the

administrative agencies render their decisions before filing a

challenge in state court.

1. Postdeprivation “Pay-Then-Protest” Process

The “pay-then-protest” process 3 requires the challenging

taxpayer to make “payment of the tax,” after which the

taxpayer can file a refund claim with the Franchise Tax

Board (the “Tax Board”). 4 If the Tax Board “fails to mail

notice of action on [the] . . . refund claim within six months

after the claim [is] filed, the taxpayer may . . . bring an action

[in state court] against the [Tax Board] . . . on the grounds

set forth in the claim for the recovery of . . . [the]

overpayment.” 5 If the Tax Board acts on the challenger’s

refund claim and denies it, a taxpayer “claiming that the tax

computed and assessed is void . . . may bring an action [in

state court], upon the grounds set forth in that claim for

refund . . . for the recovery of the . . . amount paid” plus

interest. 6 These grounds need not be included in the “four

3

This proceeding is largely governed by California Revenue &

Taxation Code § 19382.

4

Cal. Rev. & Tax. Code § 19382.

5

Cal. Rev. & Tax. Code § 19385 (emphasis added).

6

Cal. Rev. & Tax. Code § 19382.

HYATT V. YEE 7

corners of the initial claim,” but the Tax Board must have

“actual notice” of them. 7

2. Predeprivation “Protest-then-Pay” Process

The plaintiff in this case chose to challenge his tax

assessment through the protest-then-pay process. A taxpayer

who challenges an assessment through this process 8 must

“file with the [Tax Board] . . . a written protest against the

proposed deficiency assessment, specifying in the protest the

grounds upon which it is based.” 9 If the protest is filed, the

taxpayer may request that the Tax Board “reconsider the

assessment of the deficiency.” 10 If the protest is denied, the

taxpayer may “appeal[ ] in writing from the action of the

[Tax Board] ... to [the California State Board of Equalization

(“Appeals Board”)].” 11 “The [Appeals Board] . . . shall hear

and determine the appeal,” and an unsuccessful taxpayer

7

J.H. McKnight Ranch, Inc. v. Franchise Tax Bd., 110 Cal. App.

4th 978, 987 (2003) (“We see no basis for construing the statutes setting

out the administrative exhaustion requirement so as to ignore actual

notice the Board may have had from sources other than the four corners

of the initial claim. The Supreme Court has at least implicitly agreed with

this conclusion” (citing Wallace Berrie & Co. v. State Bd. of

Equalization, 707 P.2d 204 (1985)).

8

This proceeding is largely governed by California Revenue &

Taxation Code § 19381.

9

Cal. Rev. & Tax. Code § 19041.

10

Cal. Rev. & Tax. Code § 19044.

11

Cal. Rev. & Tax. Code § 19045.

8 HYATT V. YEE

may “file[ ] a petition for rehearing.” 12 After rehearing

before the Appeals Board, a taxpayer may seek review in a

California state court. 13

A taxpayer who initially challenges a residency-based

income tax assessment through the protest-then-pay

administrative process may elect to use the pay-then-protest

process at any point by paying the disputed tax, thus

guaranteeing a route to state court within six months. 14

Factual History 15

Hyatt alleges that in 1991, he moved from California to

Nevada. Two years later, the Tax Board commenced an audit

to determine whether Hyatt owed additional California state

income taxes for the 1991 tax year. The Tax Board initiated

a second audit in 1996 regarding the 1992 tax year.

Ultimately, the Tax Board determined that Hyatt owed

12

Cal. Rev. & Tax. Code §§ 19047–48.

13

Cal. Rev. & Tax. Code § 19381.

14

Cal. Rev. & Tax. Code § 19335.

15

Defendants brought both a facial and a factual challenge to

jurisdiction, but the District Court decided only the facial challenge. “A

‘facial’ attack asserts that a complaint’s allegations are themselves

insufficient to invoke jurisdiction.” Courthouse News Serv. v. Planet,

750 F.3d 776, 780 n.3 (9th Cir. 2014). “The district court resolves a facial

attack as it would a motion to dismiss under Rule 12(b)(6): Accepting

the plaintiff’s allegations as true and drawing all reasonable inferences

in the plaintiff’s favor, the court determines whether the allegations are

sufficient as a legal matter to invoke the court’s jurisdiction.” Leite v.

Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014). However, “a court may

take judicial notice of matters of public record.” Lee v. City of Los

Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (internal quotations and

citations omitted).

HYATT V. YEE 9

$1.8 million for the 1991 tax year and $5.6 million for the

1992 tax year.

Without first paying his taxes, Hyatt challenged his tax

bill on the grounds that he did not owe these taxes because

he was a resident of Nevada during 1991 and 1992. His Tax

Board protest lasted 11 years. Then, in 2008, Hyatt filed an

administrative appeal of the Tax Board’s determinations

before the Appeals Board. That appeal has yet to be decided.

Hyatt alleges that “the delays in completing the

administrative process fall squarely and primarily at the feet

of the [Tax Board].”

In April 2014, Hyatt brought this action in the district

court against the members of the Tax Board and Appeals

Board under 42 U.S.C. § 1983, seeking to enjoin the pending

administrative tax review process. At the time he filed suit,

his tax bill had ballooned to over $55 million. In his

Complaint, Hyatt alleges violations of the due process and

equal protection clauses of the Fourteenth Amendment, and

alleges that he “can no longer receive a full and fair

adjudication on the merits due to the extreme passage of time

and resulting loss of material evidence.” He claims that

during the long delay in the administrative process, “material

witnesses have passed away, memories of witnesses have

faded, and documents relevant and important to Hyatt are no

longer available.” Because of these events, he claims that he

cannot properly challenge the Tax Board’s allegations

concerning his residency. Hyatt further states that during this

administrative process, the Tax Board was out to “get” him

and that the Tax Board singled him out for reasons not

rationally related to any legitimate state interest.

10 HYATT V. YEE

The Tax Injunction Act

The Tax Injunction Act provides that: “The district

courts shall not enjoin, suspend or restrain the assessment,

levy or collection of any tax under State law where a plain,

speedy and efficient remedy may be had in the courts of such

State.” 16 This provision “restricts the power of federal

district courts to prevent collection or enforcement of state

taxes.” 17 The Supreme Court has “interpreted and applied

the Tax Injunction Act as a ‘jurisdictional rule’ and a ‘broad

jurisdictional barrier.’” 18

The Tax Injunction Act was passed as “only one of

several statutes reflecting congressional hostility to federal

injunctions issued against state officials in the aftermath of

[the Supreme] Court’s decision in Ex parte Young.” 19 It “has

its roots in equity practice, in principles of federalism, and

in recognition of the imperative need of a State to administer

its own fiscal operations.” 20 It prevents federal courts from

intruding into state tax collection, “an area which deserves

16

28 U.S.C. § 1341.

Arkansas v. Farm Credit Servs. of Cent. Arkansas, 520 U.S. 821,

17

823 (1997).

18

Id. at 825 (quoting Moe v. Confederated Salish and Kootenai

Tribes of Flathead Reservation, 425 U.S. 463, 470 (1976)). See also

Franchise Tax Bd. of California v. Alcan Aluminium Ltd., 493 U.S. 331,

338 (1990) (The Act “limit[s] drastically federal district court

jurisdiction.”).

19

Rosewell v. LaSalle Nat’l Bank, 450 U.S. 503, 522 n.28 (1981).

20

Tully v. Griffin, Inc., 429 U.S. 68, 73 (1976).

HYATT V. YEE 11

the utmost comity to state law and procedure.” 21 This is

because “[t]he power to tax is basic to the power of the State

to exist.” 22 Thus, “[g]iven the systemic importance of the

federal balance, and given the basic principle that statutory

language is to be enforced according to its terms, federal

courts must guard against interpretations of the Tax

Injunction Act which might defeat its purpose and text.” 23

Under the Tax Injunction Act, a litigant cannot challenge

the administration of state tax law in federal court if the state

court provides “a plain, speedy and efficient remedy” for the

taxpayer’s claims. This “narrow exception” 24 requires only

that a state court remedy “meet ‘certain minimal procedural

21

Jerron West, Inc. v. State of Cal., State Bd. of Equalization,

129 F.3d 1334, 1338 (9th Cir. 1997) (citing Rosewell, 450 U.S. at 522

(stating that the Act “was first and foremost a vehicle to limit drastically

federal district court jurisdiction to interfere with so important a local

concern as the collection of taxes”); Great Lakes Dredge & Dock Co. v.

Huffman, 319 U.S. 293, 301 (1943) (stating that the Act “was predicated

upon the desirability of freeing, from interference by the federal courts,

state procedures which authorize litigation challenging a tax only after

the tax has been paid”); Dillon v. State of Mont., 634 F.2d 463, 466 (9th

Cir.1980) (concluding that the Act “is meant to be a broad jurisdictional

impediment to federal court interference with the administration of state

tax systems”)).

22

Arkansas, 520 U.S. at 826 (“The federal balance is well served

when the several States define and elaborate their own laws through their

own courts and administrative processes and without undue interference

from the Federal Judiciary.”).

23

Id. at 827.

24

Redding Ford v. Cal. State Bd. of Equalization, 722 F.2d 496, 497

(9th Cir. 1983).

12 HYATT V. YEE

criteria.’” 25 Specifically, a plain, speedy, and efficient

remedy must provide a taxpayer with “a full hearing and

judicial determination at which [he] may raise any and all

constitutional objections to the tax.” 26

For a remedy to be “plain,” “the procedures available in

state court must be certain.” 27 A remedy is “efficient”

“unless it imposes an ‘unusual hardship . . . requiring

ineffectual activity or an unnecessary expenditure of time or

energy.’” 28 A remedy is “speedy” “if it does not entail a

significantly greater delay than a corresponding federal

procedure.” 29 To satisfy these requirements, a remedy “need

not necessarily be the best remedy available or even equal to

or better than the remedy which might be available in the

federal courts.” 30

25

Lowe v. Washoe Cty., 627 F.3d 1151, 1155 (9th Cir. 2010)

(quoting Rosewell, 450 U.S. at 512).

26

Rosewell, 450 U.S. at 514.

27

May Trucking Co. v. Oregon Dep't of Transp., 388 F.3d 1261,

1270 (9th Cir. 2004) (citing Direct Mktg. Ass'n, Inc. v. Bennett, 916 F.2d

1451, 1453 (9th Cir.1990) (holding that a state remedy “is not plain

within the meaning of the Tax Injunction Act . . . if there is uncertainty

regarding its availability or effect” (internal quotation and citations

omitted)).

28

Lowe, 627 F.3d at 1156 (quoting Rosewell, 450 U.S. at 518).

29

US W., Inc. v. Nelson, 146 F.3d 718, 725 (9th Cir. 1998)

(interpreting the same language in a different statute).

30

Mandel v. Hutchinson, 494 F.2d 364, 367 (9th Cir. 1974) (internal

quotations and citations removed).

HYATT V. YEE 13

DISCUSSION

“A dismissal for lack of subject matter jurisdiction is a

question of law reviewed de novo.” 31

Hyatt appeals the district court’s decision that, because

California’s pay-then-protest process continued to provide a

plain, speedy and efficient remedy for Plaintiff even though

he had decided to pursue the protest-then-pay process, the

Tax Injunction Act stripped the court of jurisdiction to hear

this suit.

Hyatt’s appeal raises three principal arguments for

review: 32 (1) a plain, speedy and efficient remedy is not

available because Hyatt cannot be required to pursue the

pay-then-protest process per California Revenue & Taxation

Code § 19382 to have his constitutional claims heard; (2) the

protest-then-pay method has not offered Hyatt a speedy

remedy and the pay-then-protest remedy will not, and

(3) Hyatt does not have a plain remedy, because it is

uncertain whether he could bring his constitutional claims as

part of either process. 33

31

Jerron, 129 F.3d at 1337.

32

Hyatt’s brief raises additional bases of appeal, but they can be

more succinctly framed in these three arguments.

33

Defendants respond that even if this court finds that Hyatt’s suit

is not barred by the Tax Injunction Act, then (1) it is barred by the general

principles of comity; (2) we should abstain pursuant to Younger v.

Harris, 401 U.S. 37 (1971); or (3) we should affirm dismissal under

Federal Rule of Civil Procedure 12(b)(6) because Hyatt fails to state a

claim. We need not reach the first two bases, because the suit is barred

14 HYATT V. YEE

At the outset, we note that the U.S. Supreme Court and

our court have held that, “[t]o the extent they are available,

California’s refund procedures constitute a plain, speedy,

and efficient remedy.” 34 Moreover, the U.S. Supreme Court

has, on several occasions, approved of pay-then-protest

remedies as plain, speedy, and efficient. 35 The issue then, is

whether the unique circumstances of this case have

prevented a plain, speedy, and efficient remedy from being

available here.

by the Tax Injunction Act. We cannot reach the last basis, because we do

not have jurisdiction to do so.

34

Alcan Aluminium, 493 U.S. at 338. See also Jerron, 129 F.3d at

1339 (“The Supreme Court and this court have concluded that

California’s tax refund remedy is generally a ‘plain, speedy and efficient’

remedy under the Act.”); Mandel, 494 F.2d at 367 (“We have held

previously that the California refund procedure is a plain, speedy and

efficient remedy.”); Aronoff v. Franchise Tax Bd. of State of Cal.,

348 F.2d 9, 11 (9th Cir. 1965) (“It has consistently been held, without a

single instance of deviation, that the refund action provided by California

Personal Income Tax Law is a ‘plain, speedy and efficient remedy’ such

as to invoke the restraints of 28 U.S.C. § 1341.”).

35

See Reich v. Collins, 513 U.S. 106, 111 (1994) (“Due process, we

should add, also allows the State to maintain an exclusively

postdeprivation regime”); California v. Grace Brethren Church,

457 U.S. 393, 416 (1982) (“Finally, we must keep in mind that at the

time that it passed the Tax Injunction Act, Congress was well aware that

refund procedures were the sole remedy in many States for unlawfully

collected taxes.”) (citing S.Rep.No.1035, 75th Cong., 1st Sess., 1 (1937);

H.R.Rep.No.1503, 75th Cong., 1st Sess., 2 (1937)); Rosewell, 450 U.S.

at 512, 523 (finding that a pay-then-protest process was a speedy,

efficient, and plain remedy under the Tax Act and relying on legislative

reports demonstrating congressional awareness that refunds were the

exclusive remedy in many state tax systems).

HYATT V. YEE 15

Does The Pay-Then-Protest Process Provide a

Sufficient Remedy Where Hyatt Chose to Use the

Protest-then-Pay Process?

Hyatt objects to the district court’s determination that the

pay-then-protest process can provide him with “a plain,

speedy and efficient remedy” even though he has pursued a

protest-then-pay process for the past 22 years. Citing Reich

v. Collins, 36 and Newsweek v. Florida Department of

Revenue, 37 Hyatt argues that requiring him to pay his large

accrued tax bill and switch remedies in order to pursue his

constitutional claims would be a “bait and switch” in

violation of his due process rights. 38

Hyatt’s reliance on Reich and Newsweek is misplaced. In

Reich, a taxpayer sued for a refund under Georgia’s tax

refund statute, but the Georgia courts held that the statutes

were not applicable and thus the taxpayer had no way to seek

a refund of his disputed tax.39 The U.S. Supreme Court,

however, held that, while a state is entitled to provide either

a protest-then-pay remedy, or a pay-then-protest remedy, or

both, it may not “reconfigure its scheme, unfairly, in

midcourse—to ‘bait and switch.’” 40 Specifically, the Court

held that a state violated federal due process when it offered

a statutory pay-then-protest remedy, and then removed that

36

513 U.S. 106 (1994) (per curiam).

37

522 U.S. 442 (1998).

38

Hyatt’s Br. at 29.

39

513 U.S. at 108–09.

40

Id. at 110–11 (emphasis added).

16 HYATT V. YEE

remedy after a taxpayer had paid his disputed taxes, so that

he no longer had any means to challenge his tax bill.41 In

Newsweek, where the magazine Newsweek was given no

opportunity to seek a refund for a state tax it had already paid

that was later found invalid, the Court reiterated this

holding. 42

In this case, Hyatt had, and still has, a plain, speedy, and

efficient remedy available: he can pursue the pay-then-

protest process. Unlike in Reich and Newsweek, the state did

not “bait and switch” Hyatt. 43 Hyatt chose to pursue the

protest-then-pay process knowing that it only permitted him

to challenge his residency in California during 1991 and

1992. Hyatt now seeks to add additional claims nullifying

the tax, but he would have to pay his outstanding tax bill to

do so. Of course, if Hyatt pursues this path and is successful,

he will be refunded the entire amount of his tax bill,

including the taxes that have accrued during the period he

has pursued the protest-then-pay process.

41

Id.

42

522 U.S. at 444–45 (“While Florida may be free to require

taxpayers to litigate first and pay later, due process prevents it from

applying this requirement to taxpayers, like Newsweek, who reasonably

relied on the apparent availability of a postpayment refund when paying

the tax. Newsweek is entitled to a clear and certain remedy and thus it

can use the refund procedures to adjudicate the merits of its claim.”).

43

See also Colonial Pipeline Co. v. Collins, 921 F.2d 1237, 1242

(11th Cir. 1991) (rejecting “literal and technical attempts” to get around

the Tax Act in a way that “would clearly conflict with the principle

underlying the Tax Injunction Act that the federal courts should

generally avoid interfering with the sensitive and peculiarly local

concerns surrounding state taxation schemes.”).

HYATT V. YEE 17

Hyatt further argues that he cannot be forced to use the

pay-then-protest remedy to pursue his constitutional claims,

because he would need to forego his statutory right to, if

successful, recover the attorney’s fees that he has spent

challenging his tax bill already. 44 It is not clear that Hyatt

would, in fact, be forced to forgo his attorney’s fees, but even

if Hyatt must abandon some of his claims to attorney’s fees

by pursuing the pay-then-protest process, this does not mean

that the state has deprived him of a plain, speedy, and

efficient remedy. 45

Does Hyatt Have A Speedy Remedy?

Hyatt notes that the Appeals Board has not completed his

administrative appeal, pending since 2008, and that, as of the

filing of this appeal, briefing before the Appeals Board was

not completed and no hearing date was set. 46 Hyatt alleges

in his complaint that Defendants are responsible for this

delay. Thus, Hyatt argues, he does not have access to a

speedy remedy, and federal jurisdiction must lie.

44

Hyatt’s Br. at 29 (citing Cal. Rev. & Tax. Code § 19717 (“The

prevailing party may be awarded a judgment for reasonable litigation

costs incurred, in the case of any civil proceeding brought by or against

the State of California in a court of record of this state in connection with

the determination, collection, or refund of any tax, interest, or penalty

under this part.”)).

45

Cf. Rosewell, 450 U.S. at 517 (holding the same with regard to

payment of interest and stating that “There is no question that under the

Illinois procedure, the court will hear and decide any federal claim.

Paying interest or eliminating delay would not make the remedy any

more ‘plain.’”).

46

Hyatt’s Br. at 24.

18 HYATT V. YEE

It would certainly be troubling if the administrative

protest-then-pay process had been delayed for so long due to

the fault of Defendants. 47 However, we need not decide

whether Hyatt’s protest-then-pay process has been speedy to

date, and thus we need not consider whether Hyatt or

Defendants caused this significant delay. 48 Even if the

protest-then-pay process has not provided Hyatt with a

speedy remedy, at any time during this process, Hyatt could,

and Hyatt still can, get to state court within six months if he

brings an action through the pay-then-protest process and the

Appeals Board does not render a final determination sooner.

The California Tax Code provides that,

47

See Long Island Lighting Co. v. Town of Brookhaven, 889 F.2d

428, 433 (2d Cir. 1989) (“Slightly more troublesome is [the] claim that

the . . . proceedings, the earliest of which have lingered over ten years in

pretrial proceedings, are simply not speedy . . . . [W]e have some

concern over any proceeding that takes over ten years to come to trial

. . . .”).

48

After argument in this case, we issued an order inviting “[t]he state

parties . . . to move for judicial notice of documents that may shed light

on the administrative and judicial proceedings that have taken place, and

the possible reasons for delay, since the time Plaintiff-Appellant Hyatt

first contested the California income tax liability at issue in this case.”

See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (“[A]

court may take judicial notice of matters of public record” (internal

quotations and citations omitted)).

Hyatt and Defendants both did so, disputing the cause of the delay

in this case. They offer documents from years of related litigation in

Nevada and New York. We need not consider whether judicial notice of

any documents addressing the cause in the delay is appropriate, as

whether Hyatt, the Defendants, or some combination caused the delay, it

does not affect the availability of a speedy remedy here. The pending

judicial notice motions are denied as moot.

HYATT V. YEE 19

[i]f the Franchise Tax Board fails to mail

notice of action on any refund claim within

six months after the claim was filed, the

taxpayer may, prior to mailing of notice of

action on the refund claim, consider the claim

disallowed and bring an action against the

Franchise Tax Board on the grounds set forth

in the claim for the recovery of the whole or

any part of the amount claimed as an

overpayment. 49

In our view, the pay-then-protest remedy now provides

Hyatt a speedy remedy, even if the protest-then-pay remedy

has not.

Does Hyatt Have Access to A Plain Remedy for His

Constitutional Claims?

Finally, Hyatt argues that it is unclear whether he would

be able to raise his constitutional claims in a pay-then-protest

proceeding, for two reasons. 50 First, he says that Section

19832 authorizes a taxpayer to “claim[] that the tax

49

See Cal. Rev. & Tax. Code § 19385.

50

Hyatt also argues that the protest-then-pay process would not

provide him with a forum for raising these new constitutional claims,

because that statute limits the adjudication to the issue of the taxpayer’s

residency during the period in question. Hyatt’s Br. at 21; Franchise Tax

Bd. v. Superior Court, 212 Cal. App. 3d 1343, 1347 (Ct. App. 1989)

(“The statutes do not authorize the superior court to prevent or enjoin

collection of the tax, but permit it only to determine the fact of [the

taxpayer’s] residence in this State during the year or years set forth in the

notice or notices of deficiency assessment” (internal quotations and

citations omitted)). This is irrelevant, if the pay-then-protest process is

sufficient.

20 HYATT V. YEE

computed and assessed is void” and to file a claim for

“recovery of the whole or any part of the amount paid.” 51

Hyatt argues that it is unclear whether a California court will

find that his constitutional claims contend that “the tax

computed and assessed is void” and thus can be heard in state

court. Second, Hyatt argues that he may be barred from

bringing these claims because they were not “the grounds set

forth in the claim for refund.” 52 Therefore, he argues, his

remedy is not “plain” and this suit should not be barred.

First, as Hyatt’s own complaint makes clear, he does

seek to void a tax. In his complaint, Hyatt seeks to “enjoin

Defendants . . . from continuing the investigation and

administrative proceedings against Hyatt that seek to assess

California state income taxes, or adjudicate the assessment

and collection of California state income taxes, against Hyatt

for the 1991 and 1992 tax years.” 53 He also seeks to “enjoin

Defendants from continuing to assess or threaten to assess,

or collect or threaten to collect, taxes, penalties and interest

from Hyatt for the 1991 and 1992 tax years.” 54 The district

court correctly concluded that “[i]t is evident that Hyatt

51

Cal. Rev. & Tax. Code § 19382 (“Except as provided in Section

19385, after payment of the tax and denial by the Franchise Tax Board

of a claim for refund, any taxpayer claiming that the tax computed and

assessed is void in whole or in part may bring an action, upon the grounds

set forth in that claim for refund, against the Franchise Tax Board for the

recovery of the whole or any part of the amount paid.”).

52

Id.

53

Compl. ¶ 107, ER 773–74.

54

Id.

HYATT V. YEE 21

seeks to void the tax or taxes assessed against him.”55

Moreover, California courts have found that constitutional

claims can qualify as claims seeking to void a tax. 56 It is thus

clear that California allows such claims to be brought in the

pay-then-protest process. Hyatt’s argument thus fails to

show that the pay-then-protest process will not provide a

plain remedy.

Hyatt’s second argument, that he will not be able to add

constitutional claims that arose after the filing of his protest

to a state court case, presents a much closer question. As

Hyatt understands the state statutes, “if [he] pays the tax

while his [Appeals Board] appeal is pending. . . [his] prior

‘protests’ . . . , for the 1991 and 1992 tax years, . . . will be

deemed to be his refund claim.” 57 A problem arises because

[t]hose protests do not contain Mr. Hyatt’s

constitutional claims as grounds for the claim

because he filed the protest before the [Tax

Board]’s and [Appeals Board]’s offending

55

ER 12. See also Black’s Law Dictionary 1805 (10th ed. 2014)

(defining “void” as “[t]o render of no validity or effect; to annul;

nullify.”). Hyatt seeks to nullify his tax bill.

56

Capitol Indus.-EMI, Inc. v. Bennett, 681 F.2d 1107, 1117 (9th Cir.

1982). See, e.g., Jensen v. Franchise Tax Bd., 178 Cal. App. 4th 426, 433

(2009).

57

Reply Br. at 14–15 (citing Cal. Rev. & Tax. Code § 19335 (“If,

with or after the filing of a protest or an appeal to the State Board of

Equalization . . . , a taxpayer pays the tax protested before the Franchise

Tax Board acts upon the protest, or the board upon the appeal, the

Franchise Tax Board or board shall treat the protest or the appeal as a

claim for refund or an appeal from the denial of a claim for refund filed

under this article.”)).

22 HYATT V. YEE

conduct. Under Section 19382, a refund

action is limited to the grounds set forth in the

refund claim. Accordingly, Mr. Hyatt could

not raise the constitutional issues in his newly

converted Section 19382 procedure because

his refund claims (i.e., his original protests)

do not include the constitutional violations.58

Under our reading of the statutes, if Hyatt pays and then

protests, the California state courts will likely allow Hyatt to

add these constitutional claims to a state court suit

challenging the tax. The state court may find that these are

not the sorts of claims that a taxpayer must include in his

initial protest or refund because they refer to conduct during

the ongoing Tax Board and Appeals Board review, rather

than the grounds on which the taxpayer contested the tax

initially. Thus, the legislative purpose served by applying the

administrative exhaustion requirement would not apply to

these claims. Moreover, even if the California courts do

apply the exhaustion requirement to these claims, they may

find that the Tax Board was “on notice” of these claims,

given the long history of litigation between these parties,

where Hyatt may have previously raised these issues. 59 The

Appeals Board may also permit Hyatt to amend his petition

to add these additional grounds. 60 At oral argument counsel

for the Tax Board and the Appeals Board both represented

58

Id. at 15.

59

See J.H. McKnight Ranch, 110 Cal. App. 4th at 986–87.

60

See Cal. Rev. & Tax. Code § 60351.

HYATT V. YEE 23

that the constitutional challenges raised here could be raised

in state court. 61

CONCLUSION

In light of the strong principles of comity that guide our

interpretation of the Tax Injunction Act, we decline to enjoin

the tax proceedings in this case. We hold that “narrow

exception” 62 to the Tax Act’s jurisdictional bar cannot be

expanded to allow this suit, and we affirm the judgment of

the district court. 63

AFFIRMED.

61

Even if Hyatt is barred from bringing these constitutional claims

in a state court proceeding, he can seek to raise the same claims in a suit

in state court against the responsible individuals.

62

Redding Ford, 722 F.2d at 497.

63

This is particularly true in light of the fact that Hyatt’s own

decisions contributed to the constitutional claims he seeks to now bring.

While we do not consider whether Hyatt contributed to the delay in the

protest-then-pay proceedings, at any point, Hyatt could have paid his tax

bill and brought a suit in state court protesting the tax within six months.