Monday, July 11, 2016
C.A. Rejects Lawyer’s Suit Over Listing as a Top Tax Debtor
By KENNETH OFGANG, Staff Writer
A Los Angeles attorney formerly listed as one of California’s 500 largest tax debtors is barred from suing the Franchise Tax Board over that designation, the Court of Appeal for this district ruled Friday.
Div. One said Ernest J. Franceschi Jr.’s action was barred by res judicata, as a similar action had been rejected earlier in federal court.
Franceschi filed that action in 2014. The attorney, who practices downtown and has been a member of the State Bar since 1984, accused the board in the suit of unconstitutionally threatening his law license and driver’s license.
Revenue and Taxation Code §19195 requires the FTB to publish the list at least twice each year. Under Business and Professions Code §494.5, when a state licensing agency, such as the Department of Motor Vehicles, receives a delinquency list containing the name of a taxpayer to whom the agency has issued a license, that agency is required to suspend the taxpayer’s license.
The State Bar of California is exempt from the mandatory suspension requirement, but may recommend the suspension of a license if an attorney’s name is included on the list.
A taxpayer must be served with notice of a state tax lien before being included on the list.
State Bar Issue
Franceschi, who allegedly owed more than $242,000, argued in his federal complaint “that the State Bar of California has serious reservations as to the constitutionality of the statutory scheme and is debating whether or not to suspend licenses of its members who are on the list,” and that no member of the State Bar had been suspended as a result of inclusion on the list, and that he would otherwise have joined the State Bar as a defendant.
He also expressed fear of having his driver’s license suspended, and said suspension of any license would violate his constitutional rights to due process and equal protection. He also argued that his tax dispute with the state began in 1995, 17 years before the statute was enacted, which he said made the application of the law to him an ex post facto law and a bill of attainder.
The federal district judge dismissed the action for failure to state a claim. Franceschi then filed his state action, seeking a writ of mandate against the board and alleging that the statute violates the right to privacy guaranteed by Art. I of the state Constitution.
Trial Court Ruling
Los Angeles Superior Court Judge Joanne O’Donnell, who has since retired, ruled that Franceschi had split his cause of action, rendering the petition subject to dismissal on res judicata grounds, and that the action was “frivolous and groundless” under Revenue and Taxation Code §19714, which allows sanctions in such cases. The judge said that the plaintiff, as an experienced litigator representing himself, should have known that the action was barred.
Justice Jeffrey Johnson, writing for the Court of Appeal, agreed that res judicata applied. The defendant, he said, had filed two separate actions involving the same parties and the same primary right, even though one was based on federal law and one on state law.
“Franceschi’s conduct here raises more questions than it answers. First, why did he not ask the federal district court to exercise supplemental jurisdiction? He had much to lose by not doing so. California courts have held that where a plaintiff makes no attempt to have a federal court exercise supplemental jurisdiction over a related state law claim, and then later files that state law claim in state court, such claims are barred by res judicata and the related prohibition against claim splitting.”
He rejected the plaintiff’s argument that the federal judge would not have exercised supplemental jurisdiction over “complex” issues of state law.
“We believe that the federal district court in the First Action would have exercised supplemental jurisdiction over Franceschi’s mandamus/privacy claim for several reasons,” he wrote—the claims arose from the same set of facts, and the state law issues did not predominate over the federal ones, and were not particularly complex.
He went on to say that the sanctions were not an abuse of discretion.
The FTB was represented in Franceschi v. Franchise Tax Board, 16 S.O.S. B267719, by Deputy Attorney General Matthew C. Heyn.
A check of the FTB website Friday revealed that as of an update last week, Franeschi’s name does not appear on the list. Of the 500 debtors listed, 10 are members of the State Bar, of whom six are active, two have been disbarred, one is under interim suspension following a felony conviction, and one—Antioch attorney Mary Nolan—is on involuntary inactive status after being convicted of tax evasion and illegal eavesdropping in federal court, unsuccessfully attempting to resign, and failing to appear at a disciplinary hearing, according to State Bar records.
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