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The Verdict Is In: No Jury Trials in California Refund Suits

Thomas Jefferson once described jury trials as “the only anchor yet imagined by man by which a government can be held to the principles of its constitution.” Jefferson would likely be disappointed by the California Supreme Court’s recent decision hold

August 1, 2011

Thomas Jefferson once described jury trials as “the only anchor yet imagined by man by which a government can be held to the principles of its constitution.” Jefferson would likely be disappointed by the California Supreme Court’s recent decision holding that taxpayers have no right to demand a jury trial in California income tax refund actions. Franchise Tax Bd. v. Superior Court, 2011 WL 2177248 (June 6, 2011).

A beneficiary of an estate filed a refund action to recover more than $15 million in California personal income taxes paid by the estate. The beneficiary demanded a jury trial rather than a bench trial. The trial court and California Court of Appeal both held that the Franchise Tax Board’s (FTB) motion to strike the jury trial demand was properly granted. While the state statute authorizing refund suits (Cal. Rev. & Tax Code § 19382) is silent regarding jury trials, the appellate court held that taxpayers have a state constitutional right to a jury trial in tax refund actions because the statutory refund action is of the same nature or class as a historical common law tax refund action.

But the California Supreme Court reversed both lower courts, diving into a lengthy historical evaluation of the nature of a common law tax refund action “as it existed at common law in 1850, when the [California] Constitution was first adopted.” The court ultimately found that no right to a jury trial exists because the present statutory tax refund action is “fundamentally different” from the old cause of action against tax collectors. 

Perhaps the court was persuaded by the FTB’s repeated allegations in its court filings that authorizing jury trials in tax refund actions would “fundamentally alter the practice of law in this field” and that, “encouraged by the prospect of arguing to a jury, taxpayers (especially affluent parties seeking large refunds) may be less likely to agree to any settlement, reducing the flow of revenue from that source.”

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