Filed 1/12/15 Berjikian v. Franchise Tax Board CA2/7

                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.


              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                DIVISION SEVEN


ENNA BERJIKIAN, et al.,                                              B252427

         Plaintiffs and Appellants,                                  (Los Angeles County
                                                                     Super. Ct. No. BC514589)
         v.

FRANCHISE TAX BOARD, et al.,

         Defendants and Respondents.




                   APPEAL from a judgment of the Superior Court of Los Angeles County,
Michael L. Stern, Judge. Reversed and remanded.


                   Vicken O. Berjikian, A Professional Law Corporation, and Freeman M.
Butland for Plaintiffs and Appellants.


                   Kamala D. Harris, Attorney General, Paul D. Gifford, Senior Assistant
Attorney General, W. Dean Freeman, William D. Gardner, Michael Yi, Marta L. Smith,
and Leslie Branman Smith, Deputy Attorneys General, for Defendants and Respondents.
                                     INTRODUCTION
       Appellants Enna and Vicken Berjikian1 challenge the constitutionality of Business
and Professions Code section 494.5,2 under which respondent Department of Motor
Vehicles (the DMV) automatically suspended both the Berjikians’ driver’s licenses, and
respondent Board of Pharmacy (the Pharmacy Board) automatically suspended Enna’s
pharmacist’s license, after the Berjikians’ names appeared on respondent Franchise Tax
Board’s (the FTB)3 list of the state’s 500 most delinquent taxpayers.
       Respondents demurred to the Berjikians’ complaint, arguing that the Berjikians’
action is barred under the California Constitution and the Revenue and Taxation Code
because the Berjikians did not pay their outstanding tax liabilities prior to filing their
complaint. Respondents also argued that even if the Berjikians’ claims are not
procedurally barred, section 494.5 is constitutional, and the DMV’s and the Pharmacy
Board’s decisions made pursuant to that statute do not violate the Berjikians’ due process
or equal protection rights. The trial court sustained respondents’ demurrer without leave
to amend as to the Berjikians’ entire complaint, imposed $5,000 in sanctions against the
Berjikians, and entered judgment dismissing the Berjikians’ action. We reverse the
judgment, reverse in part the order sustaining the demurrer, and reverse the order
imposing sanctions.
                  FACTUAL AND PROCEDURAL BACKGROUND
       The following factual summary is drawn from the Berjikians’ complaint. (See
Howard Jarvis Taxpayers Ass’n v. City of La Habra (2001) 25 Cal.4th 809, 814 (Howard



1
        Because they share the same last name, we refer to the Berjikians by their first
names to avoid confusion. (See Jacob B. v. County of Shasta (2007) 40 Cal.4th 948, 952,
fn. 1.)
2
      All further statutory references are to the Business and Professions Code unless
otherwise specified.
3
      We collectively refer to the Board of Pharmacy, the DMV, and the FTB as
respondents.
                                               2
Jarvis) [we assume the truth of the plaintiffs’ pleaded facts when reviewing a judgment
of dismissal following a sustained demurrer].)
1. The Berjikians’ Licenses and Tax Liabilities
       In 1981, Enna Berjikian received a pharmacist’s license from the Pharmacy Board;
she later received a license to practice law from the California State Bar in 2006. In
1983, Vicken Berjikian received a license to practice law from the California State Bar.
At some time prior to their initiation of the instant lawsuit, the Berjikians received
driver’s licenses from the state.
       In 1997, the FTB issued the Berjikians two Notices of Proposed Assessment
(NPA), one assessing the Berjikians’ outstanding tax liability for the 1990 tax year, and
the other assessing the Berjikians’ outstanding tax liability for the 1991 tax year. In
1998, the FTB issued the Berjikians three more NPAs assessing the Berjikians’
outstanding tax liabilities for the 1992, 1993, and 1994 tax years. In April 2011, the FTB
sent the Berjikians a sixth assessment addressing the Berjikians’ outstanding tax liability
for the 2004 tax year. The NPAs issued in 1997 and 1998 informed the Berjikians that
they had 60 days to challenge the FTB’s assessments in writing and, if requested, through
an oral hearing before the FTB.
       For the 1999, 2002, and 2008 through 2011 tax years, the Berjikians filed tax
returns and assessed their own tax liabilities.
       The Berjikians never administratively challenged any of the FTB’s assessments.
At the time the Berjikians initiated the instant case, they owed the FTB nearly $450,000,
which consists of more than $100,000 in unpaid taxes.
2. The Berjikians’ License Suspensions
      The Berjikians’ names appear on the FTB’s list of the state’s 500 most delinquent
taxpayers owing more than $100,000 in unpaid taxes (delinquency list). In May 2013,
after receiving the FTB’s delinquency list, the DMV sent the Berjikians notice that
pursuant to section 494.5, their driver’s licenses would be suspended effective September
20, 2013. The DMV’s notice informed the Berjikians that their licenses would be
reinstated once their names are removed from the delinquency list. That same month, the

                                              3
Pharmacy Board informed Enna that her pharmacist’s license would be suspended
pursuant to section 494.5 effective August 30, 2013. After receiving notice of their
pending license suspensions, the Berjikians submitted to the FTB requests to have their
names removed from the delinquency list due to alleged financial hardship. In July 2013,
the FTB summarily denied the Berjikians’ requests.
3.    Court Proceedings
      On July 9, 2013, the Berjikians filed a complaint against respondents seeking
injunctive and declaratory relief. The complaint alleged that the DMV’s and the
Pharmacy Board’s enforcement of section 494.5 violated the Berjikians’ federal and state
due process and equal protection rights. Respondents demurred, arguing the complaint
should be dismissed because the Berjikians’ claims were barred by Article XIII, section
32 of the California Constitution and Revenue and Taxation Code sections 19381 and
193824 as a result of the Berjikians’ failure to pay their outstanding tax liabilities prior to
filing their complaint. Alternatively, respondents argued the complaint should be
dismissed because their enforcement of section 494.5 did not violate the Berjikians’ due
process or equal protection rights.
      On October 16, 2013, the trial court sustained respondents’ demurrer without leave
to amend. The trial court found the Berjikians’ lawsuit was procedurally barred due to
the Berjikians’ failure to pay their outstanding tax liabilities prior to filing their
complaint. The trial court also found that the Berjikians failed to allege a sufficient
statutorily conferred interest or benefit to support a due process challenge to section
494.5. Notwithstanding these findings, the court addressed the merits of the Berjikians’
claims, finding that respondents’ enforcement of section 494.5 did not violate the
Berjikians’ due process or equal protection rights. After sustaining respondents’
demurrer without leave to amend, the trial court imposed $5,000 in sanctions against the
Berjikians, finding that the Berjikians’ claims were factually and legally groundless. (See




4
       Sometimes collectively referred to as Section 32.
                                                4
Rev. & Tax. Code, § 19714.) Judgment of dismissal was entered, and this timely appeal
followed.
                                       DISCUSSION
I.      Standard of Review
        We apply a de novo standard of review to a trial court’s order of dismissal
following an order sustaining a demurrer. (Los Altos El Granada Investors v. City of
Capitola (2006) 139 Cal.App.4th 629, 650.) In other words, we exercise our
“independent judgment about whether the complaint states a cause of action as a matter
of law.” (Ibid.) “In reviewing a judgment of dismissal after a demurrer is sustained
without leave to amend, we must assume the truth of all facts properly pleaded by the
plaintiffs, as well as those that are judicially noticeable.” (Howard Jarvis, supra, 25
Cal.4th at p. 814.)
        When a demurrer “is sustained without leave to amend, we decide whether there is
a reasonable possibility that the defect can be cured by amendment: if it can be, the trial
court has abused its discretion and we reverse; if not, there has been no abuse of
discretion and we affirm.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Such a
showing can be made for the first time before the reviewing court. (Smith v. State Farm
Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 711.) “The burden of proving
such reasonable possibility is squarely on the plaintiff.” (Blank, supra, 39 Cal.3d at p.
318.)
        A demurrer may be sustained without leave to amend where, “ ‘the facts are not in
dispute, and the nature of the plaintiff’s claim is clear, but, under the substantive law, no
liability exists.’ [Citation.]” (Seidler v. Municipal Court (1993) 12 Cal.App.4th 1229,
1233.) “A judgment of dismissal after a demurrer has been sustained without leave to
amend will be affirmed if proper on any grounds stated in the demurrer, whether or not
the court acted on that ground.” (Carman v. Alvord (1982) 31 Cal.3d 318, 324.)
II.     Relevant Statutory Framework
        Under the Revenue and Taxation Code, the FTB is required to examine a
taxpayer’s tax return to determine whether the taxpayer reported the proper amount of

                                              5
taxes. (Rev. & Tax. Code, § 19032.) In the event the FTB determines that the taxpayer
disclosed taxes less than what the taxpayer actually owes, the FTB must notify the
taxpayer of the deficiency. (Rev. & Tax. Code, § 19033.) Once the FTB’s notice is
mailed, the taxpayer has 60 days to file a written protest against the deficiency
assessment. (Rev. & Tax. Code, § 19041.) If the taxpayer fails to timely challenge the
deficiency assessment within 60 days of the date notice is mailed, the assessment
becomes final. (Rev. & Tax. Code, §§ 19041 & 19042.) If the taxpayer files a timely
challenge, the FTB is required to reconsider its assessment and, if the taxpayer so
requests, must afford the taxpayer an oral hearing. (Rev. & Tax. Code, § 19044.) After a
timely challenge, if the taxpayer is dissatisfied with the FTB’s decision, the taxpayer may
appeal that decision to the State Board of Equalization (the SBE). (Rev. & Tax. Code, §
19045.)
       Under Revenue and Taxation Code section 19195, subdivision (a), the FTB is
required to publish at least twice each year a list naming the state’s 500 taxpayers with
the largest tax delinquencies in excess of $100,000. Before including a taxpayer’s name
on the delinquency list, the FTB must inform the taxpayer that his or her name will be
included on the list unless the taxpayer pays the amount of outstanding taxes or timely
makes arrangements with the FTB to pay that amount. (Rev. & Tax. Code, § 19195,
subd. (e).)
       Under section 494.5, when a state licensing agency such as the DMV or the
Pharmacy Board 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.
(§ 494.5, subds. (a)(1)-(2) & (b)(4).)5 The licensing agency must notify the taxpayer that
his or her license will be suspended based on the inclusion of the taxpayer’s name on the
delinquency list, and the agency must wait at least 90 days from the time it issues that
notice before suspending the taxpayer’s license. (§ 494.5, subds. (e)(2) & (f)(1).) A

5
        The State Bar of California is exempt from the mandatory suspension requirement
and may recommend the suspension of a license if an attorney’s name is included on a
certified list. (§ 494.5, subd. (a)(2).)
                                             6
taxpayer whose name appears on the delinquency list is entitled to receive a 90-day
temporary license from the licensing agency if he or she is otherwise eligible to retain his
or her license. (§ 494.5, subd. (e)(2).)
       After a taxpayer receives notice of a pending license suspension, he or she may
challenge the pending suspension by making a timely written request to the FTB or SBE
only; the taxpayer may not challenge the suspension through the licensing agency. (§
494.5, subds. (h) & (m).) After submitting a written challenge, the taxpayer’s name will
be removed from the delinquency list, and his or her license will be reinstated, only if he
or she has done one of the following: (1) satisfied his or her tax obligation or entered into
an installment payment agreement to satisfy the obligation; (2) submitted a timely
challenge to the FTB, but the FTB will be unable to timely act on that challenge; or (3)
established that he or she is unable to satisfy the outstanding tax obligation due to
financial hardship. (§ 494.5, subd. (h)(1)-(3); see also § 494.5, subd. (m) [“The process
described in subdivision (h) shall constitute the sole administrative remedy for contesting
the issuance of a temporary license or the denial or suspension of a license under this
section.”].)
III.   Section 32
       In sustaining respondents’ demurrer without leave to amend, the trial court found
the Berjikians’ action was barred by Section 32 because the Berjikians did not pay their
outstanding tax liabilities prior to filing their complaint. The Berjikians contend the trial
court erred in applying Section 32 because they do not seek to prevent the FTB from
collecting their outstanding tax liabilities; rather, they challenge only the constitutionality
of respondents’ enforcement of section 494.5’s license-suspension provision without first
affording a formal hearing.
       Article XIII, Section 32 of the California Constitution provides: “No legal or
equitable process shall issue in any proceeding in any court against this State or any
officer thereof to prevent or enjoin the collection of any tax. After payment of a tax
claimed to be illegal, an action may be maintained to recover the tax paid, with interest,
in such manner as may be provided by the Legislature.” Revenue and Taxation Code

                                               7
sections 19381 and 19382 codify this constitutional prohibition against prepayment
challenges to the state’s collection of taxes with respect to claims involving the FTB or
the SBE. (Nast v. State Bd. of Equalization (1996) 46 Cal.App.4th 343, 346.)
       Section 32’s prohibition is intended “to allow revenue collection to continue
during litigation so that essential public services dependent on the [taxes] are not
unnecessarily interrupted.” (Pacific Gas & Electric Co. v. State Bd. of Equalization
(1980) 27 Cal.3d 277, 283 (Pacific Gas).) Section 32 limits the ability of the courts to
hear matters and issue relief that would interfere with the state’s collection of taxes.
(Western Oil & Gas Assn. v. State Bd. of Equalization (1987) 44 Cal.3d 208, 213
(Western Oil), citing Pacific Gas, supra, 27 Cal.3d at pp. 282-283.) Accordingly, in
determining whether Section 32 prohibits a taxpayer’s prepayment tax-related action, “
‘[t]he relevant issue is whether granting the relief sought would have the effect of
impeding the collection of a tax. [Citation.]’ [Citation.]” (Water Replenishment District
of Southern California v. City of Cerritos (2013) 220 Cal.App.4th 1450, 1465; see also
Ardon v. City of Los Angeles (2011) 52 Cal.4th 241, 252 [“[A]rticle XIII, section 32
simply prohibits courts from ‘prevent[ing] or enjoin[ing] the collection of any tax’ during
the pendency of litigation challenging the tax.”], italics in original.)
       We conclude Section 32 does not bar the Berjikians’ constitutional challenge to
section 494.5. Allowing the Berjikians to proceed with their action would not impede the
state’s ability to collect the Berjikians’ outstanding taxes. Section 494.5 establishes a
mechanism through which the state may impose non-monetary sanctions against the
state’s most delinquent taxpayers. The statute does not enable the state to collect
outstanding taxes (e.g., by seizing a taxpayer’s personal or real property) (see e.g., Dupuy
v. Superior Court (1975) 15 Cal.3d 410, 417-418 [Section 32 bars prepayment challenge
to state’s seizure of taxpayer’s property where state does not provide for pre-seizure
hearing]), or create additional tax liability for taxpayers that fall within its scope. (See
California Logistics, Inc. v. State (2008) 161 Cal.App.4th 242, 247 (California Logistics)
[“A taxpayer may not go into court and obtain adjudication of the validity of a tax which
is due but not yet paid.”].) Further, the Berjikians’ action does not challenge the validity

                                               8
or amount of outstanding taxes, interest, and penalties the state has determined the
Berjikians owe. (See Chen v. Franchise Tax Bd. (1998) 75 Cal.App.4th 1110, 1114 [“[A]
taxpayer may not obtain judicial review of the validity of a tax which is due but has not
been paid.”].) Accordingly, if the Berjikians were to ultimately succeed on their
constitutional challenge to section 494.5, the state would in no way be impaired from
collecting the Berjikians’ outstanding taxes by initiating collection proceedings against
the Berjikians.
       In light of the foregoing, we hold the trial court erred in finding the Berjikians’
entire action is barred by Section 32 and address the trial court’s order sustaining
respondents’ demurrer as to the Berjikians’ constitutional claims.
IV.    Procedural Due Process
       The Berjikians contend their complaint sufficiently alleges claims for violations of
their state and federal procedural due process rights stemming from respondents’
enforcement of section 494.5. Specifically, the Berjikians argue they were not afforded
an adequate opportunity to challenge respondents’ decision to suspend their licenses
before those suspensions went into effect. We agree and hold the trial court abused its
discretion in sustaining respondents’ demurrer without leave to amend as to the
Berjikians’ procedural due process claims.
       As a preliminary matter, we observe that the Berjikians have pled sufficient
property interests to support procedural due process claims brought under the state and
federal constitutions. Here, the Berjikians’ procedural due process claims are premised
on respondents’ suspension of Enna’s state-issued pharmacist’s license and both the
Berjikians’ state-issued driver’s licenses. Enna possesses a property interest in her
pharmacist’s license sufficient to entitle her to adequate process before that license may
be suspended. Our Supreme Court has recognized that an individual “has a property
interest in the right to practice [her] profession that cannot be taken from [her] without
due process.” (Conway v. State Bar (1989) 47 Cal.3d 1107, 1113, citing Barry v. Barchi
(1979) 443 U.S. 55, 64, 99 S.Ct. 2642, 61 L.Ed.2d 365; see also American Liberty Bail
Bonds, Inc. v. Garamendi (2006) 141 Cal.App.4th 1044, 1060 [bail agent has a sufficient

                                              9
interest in his bail-agent license to trigger state and federal due process protections before
that license may be suspended by the Department of Insurance].) Further, both the
Berjikians possess property interests in their driver’s licenses sufficient to invoke due
process protections. (See Rios v. Cozens (1972) 7 Cal.3d 792, 795-796 [judgment
vacated by Department of Motor Vehicles of State of Cal. v. Rios (1973) 410 U.S. 425, 93
S.Ct. 1019, 35 L.Ed.2d 398; but judgment reiterated and reinstated by Rios v. Cozens
(1973) 9 Cal.3d 454], citing Bell v. Burson (1971) 402 U.S. 535, 539, 91 S.Ct. 1586, 29
L.Ed.2d 90 [“Suspension of issued [driver’s] licenses . . . involves state action that
adjudicates important interests of the licensees. In such cases the licenses are not to be
taken away without that procedural due process required by the Fourteenth
Amendment”]; see also Traverso v. People ex rel. Dept. of Transportation (1993) 6
Cal.4th 1152, 1161.)
       It is well settled that “some form of hearing is required before an individual is
finally deprived of a property interest.” (See Mathews v. Eldridge (1976) 424 U.S. 319,
333, 96 S.Ct. 893, 47 L.Ed.2d 18.) Therefore, prior to a final deprivation of a protected
interest, the affected individual must be afforded the “opportunity to be heard at a
meaningful time and in a meaningful manner.” (Ibid.) This requires that the individual
be afforded the reasonable opportunity to be heard “upon such notice and proceedings as
are adequate to safeguard the right for which the constitutional protection is invoked.”
(Anderson Nat. Bank v. Luckett (1944) 321 U.S. 233, 246, 64 S.Ct. 599, 88 L.Ed. 692
(Anderson); Saleeby v. State Bar (1985) 39 Cal.3d 547, 565 (Saleeby).)
       Respondents contend the Berjikians were afforded meaningful opportunities to be
heard before their licenses were suspended. Specifically, respondents argue the
Berjikians were afforded the opportunity to demonstrate financial hardship, through
which they could have avoided suspension of their licenses. (See § 494.5, subd. (h)(3).)
Respondents further argue the Berjikians could have challenged the sufficiency of each of
the FTB’s deficiency determinations, which formed the factual basis for respondents’
enforcement of section 494.5 against the Berjikians, within 60 days of the FTB’s issuance
of each NPA. (See Rev. & Tax. Code, §§ 19041, 19042, & 19044.)

                                             10
       As noted above, procedural due process guarantees the reasonable opportunity to
be heard through procedures that are commensurate with the right for which the
constitutional protection is invoked. (Anderson, supra, 321 U.S. 233 at p. 246; Saleeby,
supra, 39 Cal.3d at p. 565.) This guarantee cannot be fulfilled, however, unless the
opportunity to be heard is “granted at a time when the deprivation can still be prevented.”
(Fuentes v. Shevin (1972) 407 U.S. 67, 81, 92 S.Ct. 1983, 32 L.Ed.2d 556.) Whether
state action deprives an individual of his or her protected property interest without due
process requires a determination of whether the action involves arbitrary adjudicative
procedures in working the challenged deprivation. (People v. Ramirez (1979) 25 Cal.3d
260, 263-264.) Here, the Berjikians were never afforded a reasonable opportunity to be
heard at a meaningful time, or in a meaningful manner, before or after their licenses were
suspended.
       First, we disagree with respondents’ argument that the financial-hardship
exemption set forth in section 494.5, subdivision (h)(3) afforded the Berjikians a
meaningful opportunity to be heard before their licenses were suspended. Subdivision
(h)(3) establishes an exemption from the statute’s license-suspension mandate upon a
taxpayer’s showing of financial hardship. (§ 494.5, subd. (h)(3).) Accordingly, section
494.5 guarantees that a taxpayer may not be deprived of his or her state-issued license
without first being afforded the opportunity to establish that he or she qualifies for a
financial-hardship exemption. It thus requires adequate procedures to determine whether
the taxpayer suffers sufficient financial hardship to avoid suspension of his or her license.
(See Saleeby, supra, 39 Cal.3d at p. 564, quoting Board of Regents of State Colleges v.
Roth (1972) 408 U.S. 564, 577, 92 S.Ct. 2701, 33 L.Ed.2d 548 [“[The dimensions of due
process rights] are defined by existing rules [ ] that stem from an independent source such
as state law – rules [ ] that secure certain benefits and that support claims of entitlement
to those benefits.”].) The statute, however, does not afford adequate procedural
protections to ensure against an erroneous or arbitrary deprivation of a taxpayer’s license
when the taxpayer claims that he or she qualifies for a financial-hardship exemption.


                                             11
       Although section 494.5, subdivision (h)(3) requires the FTB to make an individual
determination of a taxpayer’s financial status, the statute does not delineate, and the FTB
has been unable to explain,6 how the FTB is required to make such a determination. For
example, the statute does not establish standards that the FTB must follow in processing a
taxpayer’s financial-hardship request, and it does not require the FTB to explain its
rationale in denying a taxpayer’s request. (See § 494.5, subd. (h)(3).) Accordingly,
section 494.5 does not establish any procedures that guard against an arbitrary
determination of whether a taxpayer qualifies for a hardship exemption. (See Rodriguez
v. Department of Real Estate (1996) 51 Cal.App.4th 1289, 1297 (Rodriguez) [“The
required procedural safeguards are those that will, without unduly burdening the
government, maximize the accuracy of the resulting decision and respect the dignity of
the individual subjected to the decisionmaking process.”].) Additionally, section 494.5
expressly precludes a taxpayer from contesting the FTB’s denial of a hardship-exemption
request (see § 494.5, subd. (m)), which is a decision that involves a separate factual
determination from that underlying the FTB’s initial assessment of a taxpayer’s
outstanding tax liability, for which the FTB does afford the right to a contested hearing.
(Rev. & Tax. Code, §§ 19041 & 19045.) As a result, an aggrieved taxpayer who files an
unsuccessful hardship-exemption request is left without any meaningful explanation as to
why his or her request was denied, and he or she has no means of contesting that
decision. Accordingly, section 494.5 does not afford a taxpayer adequate due process, as
it guarantees that a taxpayer’s license will not be suspended in the event the taxpayer
proves that he or she suffers financial hardship but fails to ensure that the FTB’s requisite
hardship determination will not be reached through an arbitrary decisionmaking process.
       Second, we disagree with respondents’ contention that the Berjikians forfeited
their rights to contest respondents’ enforcement of section 494.5 by failing to timely

6
       At oral argument, we requested the FTB submit judicially noticeable regulations
or other documents, if available, that address the FTB’s procedures for determining
whether a taxpayer’s request to obtain a hardship determination under section 494.5,
subdivision (h)(3) should be granted or denied. The FTB responded that it was unable to
submit any such documents.
                                             12
challenge the FTB’s deficiency assessments issued between 1997 and 2011. We disagree
because section 494.5 was enacted after the expiration of the 60-day periods within which
the Berjikians could contest the FTB’s assessments, and the Berjikians could not have
been aware that their licenses could be suspended on the basis of those assessments
before those periods expired. (See Rev. & Tax. Code, §§ 19041, 19042, 19044; see also
§ 494.5.)
       The FTB first issued the Berjikians two NPAs in 1997. In 1998, the FTB issued
the Berjikians three more NPAs. Finally, on April 25, 2011, the FTB sent the Berjikians
a sixth NPA. The time to challenge any of the deficiency assessments addressed in those
NPAs expired 60 days after the challenged assessment’s corresponding NPA was mailed.
(See Rev. & Tax. Code, §§ 19041, 19042, 19044.) Thus, the last opportunity the
Berjikians had to challenge one of the FTB’s deficiency assessments was on June 24,
2011. However, section 494.5 did not go into effect until January 1, 2012. Therefore, at
the time the Berjikians were able to challenge the factual predicate supporting
respondents’ decision to suspend the Berjikians’ licenses, the statute authorizing that
decision had yet to go into effect. Accordingly, when the Berjikians did have the
opportunity to challenge the grounds supporting respondents’ suspension of their
licenses, their property interests in those licenses had yet to be implicated by section
494.5. However, once their property interests were implicated at the time section 494.5
went into effect, the Berjikians were no longer able to contest the grounds supporting
respondents’ suspension of their licenses. As a result, the Berjikians never had a
meaningful opportunity to be heard before their licenses were suspended by way of their
right to challenge the FTB’s deficiency assessments under the Revenue and Taxation
Code. (See Fuentes, supra, 407 U.S. at p. 81.)
       Contrary to respondents’ assertions, the circumstances giving rise to the
Berjikians’ license suspensions in the instant case are materially distinguishable from
those at issue in Rodriguez, supra, and Pickell v. Sands (E.D. Cal., Feb. 7, 2014, 2:12-
CV-0373 TLN DAD) 2014 WL 546049, at *1. In both Rodriguez and Pickell, the
plaintiffs’ professional licenses were automatically suspended without the right to formal

                                             13
administrative hearings before the agency responsible for suspending the licenses, and in
both cases the reviewing courts rejected constitutional challenges to the automatic
suspension provisions of the underlying statutory schemes (section 7145.5 in Pickell;
section 10475 in Rodriguez). However, in both cases, the courts’ constitutional analyses
turned largely on the existence of prior opportunities to challenge the factual bases giving
rise to the automatic suspensions through formal hearings afforded at times when the
plaintiffs’ property interests were already at stake -- opportunities that did not exist in the
Berjikians’ case. (See Rodriguez, supra, 51 Cal.App.4th at p. 1298; Pickell, supra, 2014
WL 546049 at *7.)
       For example, in Rodriguez, before the plaintiff’s broker’s license was suspended
under section 10475, one of the plaintiff’s former clients was required to obtain a final
judgment against the plaintiff in a trial court. (Rodriguez, supra, 51 Cal.App.4th at pp.
1296, 1298.) Since the final judgment served as the factual basis underlying section
10475’s license-suspension provision, the Court of Appeal observed that the plaintiff was
afforded “the full procedural safeguards in a court of law” before his license was
suspended through the separate proceeding leading to the final judgment. (Id. at p. 1298.)
Further, the statutory scheme in Rodriguez afforded the plaintiff contractor an additional
level of due process protection that the Berjikians do not enjoy under section 494.5: the
right to petition the trial court for a writ of mandate in the event the plaintiff’s written
challenge to his license suspension was denied. (See id. at pp. 1296, 1298.)
       In Pickell, the plaintiff’s contractor’s license was automatically suspended
pursuant to section 7145.5 after he failed to resolve his outstanding tax liabilities assessed
by the FTB. (Pickell, supra, 2014 WL 546049 at **3-5.) Although similar to section
494.5 in that it authorizes the Contractor’s State Licensing Board to suspend a
contractor’s license in the event the contractor incurs outstanding final tax liabilities
assessed by the FTB, the statute in Pickell was enacted in 1990, more than a decade
before the FTB issued its first assessments against the plaintiff. (See id. at **3-4; see
also § 7145.5.) Accordingly, at the time the FTB issued its assessments, and throughout
the periods the plaintiff was able to challenge those assessments, the plaintiff’s property

                                               14
interest in his contractor’s license was already subject to deprivation under section
7145.5. In light of this fact, the district court found that the plaintiff was afforded a
reasonable opportunity to be heard through the Revenue and Taxation Code’s separate
procedures for challenging the FTB’s tax assessments before his license was
automatically suspended under section 7145.5. (Pickell, supra, 2014 WL 546049 at
**7-8; see also Goldberg v. Kelly (1970) 397 U.S. 254, 267 [“Due process does not, of
course, require two hearings.”].)
       In light of the foregoing, we conclude that the Berjikians were not afforded
adequate procedural safeguards to ensure against an erroneous deprivation of their
property interests in their state-issued licenses. Accordingly, we reverse the trial court’s
judgment with respect to its order dismissing the Berjikians’ procedural due process
causes of action without leave to amend.
V.     Equal Protection and Substantive Due Process
       The Berjikians next contend their complaint sufficiently alleges causes of action
for violations of their equal protection and substantive due process rights stemming from
respondents enforcement of section 494.5. For the reasons set forth below, we disagree.
       A. Equal protection
       The Berjikians argue section 494.5 impermissibly singles out licensees who fall
within the state’s 500 largest tax delinquencies totaling more than $100,000. We reject
this argument because section 494.5 is rationally related to a legitimate state interest.
       The concept of equal protection requires that “persons similarly situated with
respect to the legitimate purpose of [a particular] law receive like treatment. [Citation.]”
(Cooley v. Superior Court (2002) 29 Cal.4th 228, 253.) To establish a successful equal-
protection claim, an individual must first demonstrate that the state has adopted a
classification or enacted a regulation that affects similarly situated groups differently.
(Ibid.) “‘[I]n areas of social and economic policy, a statutory classification that neither
proceeds along suspect lines nor infringes fundamental constitutional rights must be
upheld against [an] equal protection challenge if there is any reasonably conceivable
state of facts that could provide a rational basis for the classification.’ [Citation.]”

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(Kasler v. Lockyer (2000) 23 Cal.4th 472, 481, italics in original.) “Where there are
‘plausible reasons’ for [the classification] ‘our inquiry is at an end.’ [Citation.]” (Ibid.,
alteration in original.)
       The Berjikians assert section 494.5 treats similarly-situated state licensees
different by punishing only those licensees who fall within the state’s 500 most
delinquent taxpayers and owe more than $100,000 in outstanding taxes. Because the
regulation addresses the state’s economic policy and does not implicate a suspect
classification, a fundamental right, or gender, section 494.5 is subject to rational basis
review. (See People v. Hofsheier (2006) 37 Cal.4th 1185, 1200; Kasler, supra, 23
Cal.4th at p. 481.)
       Section 494.5 withstands such review. The state has a legitimate interest in
ensuring taxes are paid and collected. (See California Logistics, supra, 161 Cal.App.4th
at p. 251; see also Dupuy, supra, 15 Cal.3d at p. 416.) Limiting section 494.5’s
application to the state’s top 500 delinquent taxpayers provides a feasible method of
achieving this interest by creating a taxpaying incentive for the state’s most egregious tax
offenders who are likely able to contribute the most to the state’s tax backlog due to their
professional employment. While the state could have set section 494.5’s eligibility
cutoffs at numbers higher or lower than the 500 most delinquent taxpayers who owe at
least $100,000 while still maintaining a feasible system, this possibility alone does not
render section 494.5’s distinction unconstitutional. (See Kasler, supra, 23 Cal.4th at p.
482.) The state’s decision to cap the list at 500 delinquent taxpayers strikes a rational
balance between the state’s interest in maintaining a manageable number of taxpayers
potentially subject to license suspension while providing a large enough pool from which
the state may recover a meaningful amount of unpaid taxes without substantially
interfering with the ability of the state’s taxpayer base to earn a living.
       B. Substantive due process
       On appeal, the Berjikians address their substantive due process claims only to the
extent that they allege section 494.5 impermissibly infringes on Enna’s right to engage in
the profession of her choice; they do not address whether, or to what degree, their

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substantive due process rights are implicated by section 494.5’s suspension of their
driver’s licenses. Therefore, we limit our following discussion to the Pharmacy Board’s
suspension of Enna’s pharmacist’s license. (See Paterno v. State of California (1999) 74
Cal.App.4th 68, 106 [“An appellate court is not required to examine undeveloped claims,
nor to make arguments for parties.”].)
       In the context of legislative action, “the constitutional guaranty of substantive due
process protects against arbitrary . . . action; it requires legislation not to be
‘unreasonable, arbitrary or capricious’ but to have ‘a real and substantial relation to the
object sought to be attained.’ [Citation.]” (Coshow v. City of Escondido (2005) 132
Cal.App.4th 687, 711.) If the complained-of legislation does not implicate a fundamental
right, it comports with substantive due process “so long as it reasonably relates ‘to a
proper legislative goal.’ [Citation.]” (Coleman v. Department of Personnel
Administration (1991) 52 Cal.3d 1102, 1125.)
       The right to choose one’s profession is not fundamental. (Landau v. Superior
Court (1998) 81 Cal.App.4th 191, 210 [“the courts have concluded . . . there is no
fundamental right to work at a particular occupation or for a particular employer”];
California Gillnetters Assn. v. Department of Fish & Game (1995) 39 Cal.App.4th 1145,
1155 (Gillnetters).) Therefore, a regulation restricting an individual’s ability to engage in
a certain profession does not run afoul of substantive due process unless it bears no
rational relationship to a legitimate government interest. (See Landau, supra, 81
Cal.App.4th at p. 210, citing Gillnetters, supra, 39 Cal.App.4th at p. 1155.) In the
context of legislation regulating an individual’s ability to engage in a certain profession,
such legislation will withstand constitutional scrutiny if it bears a rational connection
with both a legitimate government interest and the affected individual’s fitness to practice
his or her profession. (See Dittman v. California (9th Cir. 1999) 191 F.3d 1020, 1030
(Dittman), citing Schware v. Board of Bar Examiners (1957) 353 U.S. 232, 239, 77 S.Ct.
752, 1 L.Ed.2d 796; see also In re Johnson (1992) 1 Cal.4th 689, 698, fn. 5.)




                                               17
       The Berjikians argue section 494.5’s license-suspension provision violates Enna’s
substantive due process rights because it does not bear a rational relationship to Enna’s
fitness to engage in the pharmaceutical profession. We disagree.
       Section 494.5 withstands rational basis review under a substantive due process
analysis. First, as discussed above, the state has a legitimate interest in ensuring the
prompt collection of taxes, and section 494.5 bears a rational relationship to that interest.
(See California Logistics, supra, 161 Cal.App.4th at p. 251.) Second, the Legislature
rationally could have concluded that a licensed pharmacist’s failure to pay taxes such that
he or she has accumulated more than $100,000 in outstanding taxes and is among the
state’s 500 most delinquent taxpayers is related to the pharmacist’s capacity to maintain
financial accountability while engaging in the pharmaceutical profession. (See Dittman,
supra, 191 F.3d at pp. 1031-1032.) Indeed, in a separate but related context, the
Legislature has articulated the need for those engaging in the pharmaceutical profession
to maintain financial accountability. For example, prior to enacting section 494.5, the
Legislature authorized the Pharmacy Board to adopt and enforce regulations requiring
pharmacy corporations to maintain adequate financial security to ensure that such
corporations are capable of satisfying claims made against them by their patients or
clients. (See § 4154.) Conceivably, section 494.5 represents another means through
which the state is able to better ensure that one engaging in the pharmaceutical profession
maintains a sufficient level of financial accountability. (See Santa Clara County Local
Transportation Authority v. Guardino (1995) 11 Cal.4th 220, 261 [“[T]he law need not
be in every respect logically consistent with its aims to be constitutional. It is enough
that there is an evil at hand for correction, and it might be thought that the particular
legislative measure was a rational way to correct it.”].) To be sure, a pharmacist’s ability
to remain current on his or her tax obligations reflects upon that individual’s ability to
remain financially accountable for the liabilities that may arise out of his or her
pharmaceutical practice. (Cf. Dittman, supra, 191 F.3d at p. 1032 [“[A]n acupuncturist
who is incapable of paying, or refuses to pay, . . . taxes is less likely to satisfy potential
liabilities owed to patients.”].)

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       In light of the foregoing, we conclude the trial court properly dismissed the
Berjikians’ equal protection and substantive due process claims without leave to amend.
VI.    Sanctions
       After sustaining respondents’ demurrer without leave to amend, the trial court
imposed $5,000 in sanctions against the Berjikians pursuant to Revenue and Taxation
Code section 19714 (hereinafter referred to as section 19714). Under section 19714,
“[w]henever it appears to the State Board of Equalization or any court of record of this
state that proceedings before it under this part have been instituted or maintained by the
taxpayer primarily for delay or that the taxpayer’s position in the proceedings is frivolous
or groundless, or that the taxpayer unreasonably failed to pursue available administrative
remedies, a penalty in an amount not in excess of five thousand dollars ($5,000) shall be
imposed.” In imposing sanctions against the Berjikians, the trial court found the
Berjikians’ entire action lacked factual and legal merit. The Berjikians contend the court
abused its discretion in imposing sanctions because they adequately pled claims for
violation of their constitutional rights. We agree.
       We review the trial court’s sanctions order for an abuse of discretion. (Compare
Rev. & Tax. Code, § 19714 with Code Civ. Proc., § 128.5 [under Code of Civil
Procedure section 128.5, trial courts may order a party and its attorney to pay reasonable
expenses for initiating a suit that is frivolous or solely intended to cause unnecessary
delay]; see also In re Marriage of Feldman (2007) 153 Cal.App.4th 1470, 1478;
Foundation for Taxpayer and Consumer Rights v. Garamendi (2005) 132 Cal.App.4th
1375, 1388.) An action “should be held to be frivolous only when it is prosecuted for an
improper motive – to harass the respondent or delay the effect of an adverse judgment –
or when it indisputably has no merit – when any reasonable attorney would agree that the
[action] is totally and completely without merit.” (In re Marriage of Flaherty (1982) 31
Cal.3d 637, 650.) As we concluded above, the Berjikians have adequately pled claims
for violations of their state and federal procedural due process rights arising out of
respondents’ enforcement of section 494.5, and those claims are not barred by Section 32.


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Accordingly, the Berjikians’ action is not frivolous and does not warrant imposition of
sanctions under section 19714.
                                     DISPOSITION
       The judgment is reversed, and the matter remanded for proceedings not
inconsistent with this opinion. The parties are to bear their own costs on appeal.




                                                                             WOODS, J.


We concur:




              PERLUSS, P. J.                                                 ZELON, J.




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