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Franchise Tax Bd. v. Hyatt

Supreme Court of the United States

January 9, 2019, Argued; May 13, 2019, Decided

No. 17-1299.

Opinion

Justice Thomas delivered the opinion of the Court.

This case, now before us for the third [***6]  time, requires us to decide whether the Constitution permits a State to be sued by a private party without its consent in the courts of a different State. We hold that it does not and overrule our decision to the contrary in Nevada v. Hall, 440 U. S. 410, 99 S. Ct. 1182, 59 L. Ed. 2d 416 (1979).

In the early 1990s, respondent Gilbert Hyatt earned substantial income from a technology patent for a computer formed on a single integrated circuit chip. Although Hyatt’s claim was later canceled, see Hyatt v. Boone, 146 F. 3d 1348 (CA Fed. 1998), his royalties in the interim totaled millions of dollars. Prior to receiving the patent, Hyatt had been a long-time resident of California. But in 1991, Hyatt sold his house in California and rented an apartment, registered to vote, obtained insurance, opened a bank account, and acquired a driver’s license in Nevada. When he filed his 1991 and 1992 tax returns, he claimed Nevada—which collects no personal income tax, see Nev. Const., Art. 10, §1(9)—as his primary place of residence.

Petitioner Franchise Tax Board of California (Board), the state agency responsible for assessing personal income tax, suspected that Hyatt’s move was a sham. Thus, in 1993, the Board launched an audit  [*1491]  to determine whether Hyatt underpaid his 1991 and 1992 state income taxes by misrepresenting his residency. [***7]  In the course of the audit, employees of the Board traveled to Nevada to conduct  [**773]  interviews with Hyatt’s estranged family members and shared his personal information with business contacts. In total, the Board sent more than 100 letters and demands for information to third parties. The Board ultimately concluded that Hyatt had not moved to Nevada until April 1992 and owed California more than $10 million in back taxes, interest, and penalties. Hyatt protested the audit before the Board, which upheld the audit after an 11-year administrative proceeding. The appeal of that decision remains pending before the California Office of Tax Appeals.

In 1998, Hyatt sued the Board in Nevada state court for torts he alleged the agency committed during the audit. After the trial court denied in part the Board’s motion for summary judgment, the Board petitioned the Nevada Supreme Court for a writ of mandamus ordering dismissal on the ground that the State of California was immune from suit. The Board argued that, under the Full Faith and Credit Clause, Nevada courts must apply California’s statute immunizing the Board from liability for all injuries caused by its tax collection. See U. S. Const., Art. IV, §1; Cal. Govt. Code Ann. §860.2 (West 1995). The Nevada Supreme Court rejected [***8]  that argument and held that, under general principles of comity, the Board was entitled to the same immunity that Nevada law afforded Nevada agencies—that is, immunity for negligent but not intentional torts. We granted certiorari and unanimously affirmed, holding that the Full Faith and Credit Clause did not prohibit Nevada from applying its own immunity law to the case. Franchise Tax Bd. of Cal. v. Hyatt, 538 U. S. 488, 498-499, 123 S. Ct. 1683, 155 L. Ed. 2d 702 (2003) (Hyatt I). Because the Board did not ask us to overrule Nevada v. Hall, supra, we did not revisit that decision. Hyatt I, supra, at 497, 123 S. Ct. 1683, 155 L. Ed. 2d 702.

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139 S. Ct. 1485 *; 203 L. Ed. 2d 768 **; 2019 U.S. LEXIS 3399 ***; 27 Fla. L. Weekly Fed. S 789; 2019 WL 2078084

FRANCHISE TAX BOARD OF CALIFORNIA, Petitioner v. GILBERT P. HYATT

Notice: The LEXIS pagination of this document is subject to change pending release of the final published version.

Subsequent History: On remand at, Remanded by Franchise Tax Bd. v. Hyatt, 2019 Nev. Unpub. LEXIS 852 (Aug. 5, 2019)

Prior History:  [***1] ON WRIT OF CERTIORARI TO THE SUPREME COURT OF NEVADA

Franchise Tax Bd. v. Hyatt, 407 P.3d 717, 2017 Nev. LEXIS 138 (Dec. 26, 2017)

Disposition: 133 Nev. ___, 407 P. 3d 717, reversed and remanded.

CORE TERMS

immunity, courts, sovereign immunity, sovereign, overrule, sovereignty, cases, suits, international law, interstate, comity, exempt, federal court, sister state, ratification, Debates, altered, absolute immunity, private suit, Eleventh Amendment, national law, Convention, decisions, tribunals, ratified, foreign sovereign, sovereign nation, absolute right, state immunity, federal forum

Constitutional Law, State Sovereign Immunity, Governments, State & Territorial Governments, Claims By & Against, Courts, Judicial Precedent