Court Opinion

ID: 9600820
Source: CourtListenerOpinion
Date Created: 2023-08-22 01:31:46.105715+00
Date Added: 2024-06-11T09:37:27.613293
License: Public Domain

VOSS, Judge,
concurring in part, dissenting in part.
I concur with the majority’s opinion with one exception: I believe that section 1983 (§ 1983) challenges to state taxing schemes are subject to administrative exhaustion. I view this position as the logical extension of our holding in Bohn and one which is consistent with the approach taken by virtually all states that have addressed the question. See, e.g., Neff v. New Mexico, Through Taxation and Revenue Department, 116 N.M. 240, 861 P.2d 281 (App.1993); Zarda v. Kansas, 250 Kan. 364, 826 P.2d 1365 (1992), cert. denied, 504 U.S. 973, 112 S.Ct. 2941, 119 L.Ed.2d 566 (1992); Dean v. Kansas, 250 Kan. 417, 826 P.2d 1372 (1992), cert. denied sub nom., Zarda v. Kansas, 504 U.S. 973, 112 S.Ct. 2941, 119 L.Ed.2d 566 (1992); Boughton Trucking and Materials, Inc. v. County of Will, 229 Ill.App.3d 576, 171 Ill.Dec. 299, 593 N.E.2d 1119 (1992); Bancroft Information Group, Inc. v. Comptroller of the Treasury, 91 Md.App. 100, 603 A.2d 1289 (1992); Nutbrown v. Munn, 311 Or. 328, 811 P.2d 131 (1991), cert. denied, 502 U.S. 1030, 112 S.Ct. 867, 116 L.Ed.2d 773 (1992); Hogan v. Musolf, 163 Wis.2d 1, 471 N.W.2d 216 (1991), cert. denied, 502 U.S. 1030, 112 S.Ct. 867, 116 L.Ed.2d 773 (1992).
I agree with the reasoning of the aforementioned cases because I believe that the U.S. Supreme Court’s ruling in McNary ex-*21eludes § 1983 challenges to state tax systems from the non-exhaustion rule of Felder. In McNary, the Court made taxpayer suits under § 1983, for all intents and purposes, the exclusive responsibility of state tribunals. The Court stated:
[W]e hold that taxpayers are barred by the principle of comity from asserting § 1983 actions against the validity of state tax systems in federal courts. Such taxpayers must seek protection of their federal rights by state remedies, provided of course that those remedies are plain, adequate, and complete, and may ultimately seek review of the state decisions in this Court.
454 U.S. at 116, 102 S.Ct. at 186 (emphasis added) (footnote omitted). Thus, under McNary, taxpayers’ § 1983 claims are to be fully adjudicated in state courts and thereafter review is to be sought from the U.S. Supreme Court. In light of this, taxpayer suits under § 1983 are arguably no different than any other tax claims (whether based on state law, federal law, or the Constitution), all of which even the majority agrees are subject to the exhaustion requirement under Bohn. 174 Ariz. at 250, 848 P.2d at 335 (exhaustion of administrative remedies is not optional even if constitutional doctrines cannot be applied by the Department). Therefore, I would require administrative exhaustion for all taxpayer claims.
The majority, however, finds the cases that have taken this approach unpersuasive (particularly Hogan and Nutbrown) and cites Murtagh, 535 Pa. 50, 634 A.2d 179, as announcing the better reasoned rule. The Pennsylvania Supreme Court in Murtagh reached its result based on the conclusion that “the principle of comity that causes a federal court to refrain from exercising jurisdiction over section 1983 tax ... cases has no relevance to [such cases] in state court____” Id at 185. I disagree. In McNary, the Court agreed 9-0 in the judgment, but was divided 5-4 as to the basis for that judgment. The majority based its decision on principles of comity while the concurring minority preferred to apply the exhaustion doctrine. The one thing upon which all of the Justices in McNary agreed, however, was that special, obvious reasons existed justifying the policy of federal noninterference with state tax collection and administration. The Court stated:
If federal declaratory relief were available to test state tax assessments, state tax administration might be thrown into disarray, and taxpayers might escape the ordinary procedural requirements imposed by state law____ Moreover, federal constitutional issues are likely to turn on questions of state tax law, which, like issues of state regulatory law, are more properly heard in the state courts.
McNary, 454 U.S. at 108-09 n. 6, 102 S.Ct. at 182 n. 6; Id. at 137-38 n. 27, 102 S.Ct. at 197 n. 27 (Brennan, J., concurring in the judgment) (quoting Perez v. Ledesma, 401 U.S. 82, 128 n. 17, 91 S.Ct. 674, 699 n. 17, 27 L.Ed.2d 701 (1971) (Brennan, J., concurring in part, dissenting in part)). I believe that these reasons are equally relevant and applicable to state court interference in the administrative review of tax claims. As the Wisconsin Supreme Court noted in Hogan:
It would be no less disruptive of the state’s internal economy and administrative tax procedures for a state court to act under sec. 1983 and suspend the usual tax collection and refund procedures of the state than it would be for a federal court to do so. In addition, regardless of which court interferes with the state’s fiscal operations, tax officials would be improperly denied the opportunity to rectify any alleged impropriety before being subject to a sec. 1983 action.
471 N.W.2d at 222.
The majority, however, contends that exempting § 1983 claims from the exhaustion requirement is proper and necessary because: (1) McNary does not apply where administrative remedies are inadequate; (2) states that require exhaustion for § 1983 claims, do so on the basis of explicit language which is lacking in our revised statutes; (3) Nutbrown and Hogan are inapplicable and/or poorly reasoned; (4) there is no valid reason to create an exception to Zeigler; and (5) permitting taxpayers to forego the administrative process in bringing their § 1983 claims will reduce inconvenience, inefficiency, delay, and expense. I am not persuaded by *22any of these arguments and address each in turn.
The majority first finds McNary and the cases which rely on it inapplicable because the administrative remedies available to taxpayers in Arizona are not “adequate.” In the majority’s view, administrative remedies in Arizona are inadequate because the tax board lacks the ability to declare tax statutes unconstitutional or enjoin their enforcement. There are fundamental flaws in this reasoning. First, it is dichotomous to exempt § 1983 claims from exhaustion based on the tax board’s inability to decide questions of constitutionality when we have already held that the board’s inability provides no exemption for constitutional claims arising under sections other than § 1983. See Bohn, 174 Ariz. at 250, 848 P.2d at 335.
Similarly, it is illogical to deem the administrative claims process inadequate based on the tax board’s inability to issue an injunction when even the courts are, as a general rule, denied that power by statute. A.R.S. § 42-124(B)(1) (1991) (“No injunction ... may issue in an action in any court in this state ... to prevent or enjoin the collection of any tax____”). The only exception to this statute is where the court finds the taxing scheme unconstitutional12—a finding which the tax board cannot make. Thus, the tax board’s inability to issue injunctions is simply a natural consequence of its inability to rule on the constitutionality of a tax. Since we do not excuse exhaustion based on the latter, it makes no sense to obviate the requirement based on the former when the two are so tightly intertwined.
But even if the majority is correct in deeming Arizona’s administrative tax claim remedies inadequate on these bases, the majority’s holding that this inadequacy makes McNary and its progeny inapplicable to this case is simply wrong.13 The majority errs in its assertion that “the McNary analysis required only that a taxpayer exhaust the state administrative procedures that are a precondition to suit in state court.” McNary holds nothing of the kind. As quoted above, McNary holds that § 1983 challenges to state taxing systems are not to be entertained in federal courts at all unless “state remedies” are inadequate. By state remedies the Court clearly was not referring solely to administrative remedies as the majority suggests. The adequacy of state remedies under McNary is to be gauged by the entire range of administrative and judicial procedures available to claimants. As the Maryland Court of Special Appeals recognized, McNary “acknowledges the appropriateness of resolving § 1983 tax claims according to the procedures established by the states, including exhaustion of administrative remedies.” Bancroft Information, 603 A.2d at 1296. Thus, I disagree with the majority focusing solely on the perceived shortcomings of the administrative process in their effort to make McNary inapplicable.
I also disagree with the majority’s approach on this issue because it creates a bad precedent. Under the majority’s holding, taxpayers in Arizona now have permission not only to ignore state administrative exhaustion requirements in bringing their § 1983 actions in state court, they also can persuasively argue that they are no longer barred by McNary from filing such claims directly in federal court because the Arizona Court of Appeals has deemed state tax remedies inadequate. I do not believe this is a desirable or correct result. The Court in McNary did not intend to give taxpayers the ability to circumvent state court jurisdiction based on inadequacies in administrative remedies.
The majority also holds that we should exempt § 1983 claims from administrative exhaustion requirements because “[t]he rule of exhaustion ... is usually applied [based *23on] an express statutory mandate [and] Arizona has no express statute requiring] exhaustion.” I disagree. A.R.S. section 42-115 sets the period for claims for credit or refunds as four years (per section 42-113) and provides that failure to begin an action for refund or credit within the time specified by this section is a bar against recovery of taxes by the taxpayer. Similarly, section 42-122 requires a taxpayer to file a petition within ninety days setting forth the reasons why a hearing correction or redetermination should be granted. “If the taxpayer does not file a petition for hearing, correction or redetermination within the period provided by this section, the amount determined to be due becomes final .at the expiration of the period.” A.R.S. § 42-122(B) (1991). Furthermore, appeals of decisions of the department to the state board, once decided, become final after thirty days and “[fjailure to bring the action [as an appeal in superior court] within thirty days constitutes a waiver of the protest and a waiver of all claims against this state arising from illegality in the tax, penalties and interest so paid” AR.S. § 42-124(B) (1991) (emphasis added). We have previously held that failure to comply with a similar statute acts as res judicata with regard to administrative findings and bars collateral attack via § 1983 in superior court. See Gilbert v. Board of Medical Examiners, 155 Ariz. 169, 745 P.2d 617 (App.1987). In light of that decision, I view these statutes as a sufficient mandate for administrative exhaustion.
The majority also relies on Zeigler, 162 Ariz. 77, 781 P.2d 54, to support its conclusion that exhaustion of administrative remedies should never apply to § 1983 actions. I do not read Zeigler and Felder—the case upon which Zeigler relies—so broadly, especially in light of McNary. McNary clearly creates an exception to Felder and should be the basis for our making a similar exception to Zeigler.
As for the majority’s contention that its decision will reduce “inconvenience, inefficiency, delay, and expense” I must simply ask: For whom? Clearly, this decision will not provide such benefits to state tax officials who now find themselves subject to being haled at any time into either state or federal court to answer taxpayers’ § 1983 complaints. Nor will this decision make life any easier for our trial courts. Instead, they likely will be faced with having to assume the role of the tax board in reviewing refund claims under the guise of § 1983 without the benefit of any factual record having been created prior to the case coming before them. It is exactly for these reasons that other states have chosen to require administrative exhaustion. “[T]he policies which motivated the Court’s decision in McNary are equally applicable to sec. 1983 actions in state court.” Hogan, 471 N.W.2d at 222. I agree and would adopt a policy requiring administrative exhaustion for all tax claims in Arizona.
ORDER
The court has considered appellants’ “Motion for Reconsideration and in the Alternative, Clarification of Limited Portions of Opinion,” the response, and reply; appellees’ “Motion for Reconsideration,” the response, and reply; and appellants’ application for award of attorneys’ fees and costs, the objections to the award of attorneys’ fees and costs, and the reply.
An error was made on page four of the opinion in the above-mentioned matter filed on September 13, 1994. On page four, paragraph six, we cited 26 U.S.C. section 414(h). The correct citation is 4 U.S.C. section 111.
We deny appellant’s request, pursuant to the “private attorney general” doctrine, for attorneys’ fees in excess of the statutory limit established in A.R.S. section 12-348 (1992). The “private attorney general” doctrine is designed to encourage public interest litigation. Arnold v. Department of Health Servs., 160 Ariz. 593, 609, 775 P.2d 521, 537 (1989). The doctrine is inapplicable here because appellants sought only to recover money for themselves; they did not seek to advance the public interest. Cf. Corley v. Arizona Bd. of Pardons & Paroles, 160 Ariz. 611, 613, 775 P.2d 539, 541 (App.1989). In fact, the state may have to impose burdens on the general public to raise the money that may be needed to satisfy appellants’ claims.
*24We deny appellants’ request for attorneys’ fees pursuant to 42 U.S.C. section 1988 because appellants failed to request such fees in the briefs. Rule 21(c), Rules of Civil Appellate Procedure, provides that when “attorneys’ fees are claimed pursuant to statute ... a request for allowance of attorneys’ fees ... shall be made in the briefs on appeal.” This court has interpreted that language to require the identification of the statute under which attorneys’ fees are sought. See City of Phoenix v. Superior Court, 144 Ariz. 172, 177, 696 P.2d 724, 729 (App.1985). There is a good reason for this. Identifying the statute under which fees are sought enables the opposing party to respond to the request and allows us to address the issue in our decision. Here, appellants made a bare request for attorneys’ fees. Despite this procedural defect, we awarded appellants’ attorneys’ fees under A.R.S. section 12-348. Nevertheless, appellants waived their claim for attorneys’ fees under section 1988 because they did not, in their briefs, identify that statute. Therefore,
IT IS ORDERED granting the taxpayers’ “Motion for Reconsideration and in the Alternative, Clarification of Limited Portions of Opinion,” and correcting the opinion as follows:
Changing “26 U.S.C. section 414(h)” to “4 U.S.C. section 111”
[Editor’s Note: Correction incorporated for purposes of publication.]
IT IS FURTHER ORDERED granting appellants’ attorneys’ fees pursuant to A.R.S. section 12-348 in the amount of $20,000, plus costs.
IT IS FURTHER ORDERED denying attorneys’ fees pursuant to section 1988 for failure to request such fees in the briefs.
IT IS FURTHER ORDERED, by majority decision with Judge Voss dissenting, that appellees’ motion for reconsideration is denied.

. The cases cited by the majority as examples of injunctive relief in tax cases are clearly die exception to this general restriction and are both based on findings that the taxing schemes at issue were unconstitutional. I read these cases as standing for the proposition that injunctions in tax claims are only appropriate when the tax system being challenged is unconstitutional.

. As for the majority's other objection to the applicability of Hogan, 1 agree that Hogan—insofar as it can be read as requiring complete appellate exhaustion of all state remedies prior to filing a § 1983 action—goes too far.