The NCSL Blog

23

By Lisa Soronen

Some Supreme Court case are epic because they are important. Other cases are epic because they have been litigated for decades. Depending on how the Court rules, Hyatt II may be important for both reasons.

The United States Supreme CourtGilbert Hyatt’s dispute with the California Franchise Tax Board began in the early 1990s. The Supreme Court decided one issue in his case in the early 2000s. The stakes in Hyatt II are high not just for Hyatt but for all states.

In 1993 the Franchise Tax Board (FTB) of California audited Gilbert Hyatt following a newspaper article reporting he made a lot of money patenting a computer chip. Hyatt’s 1991 tax return indicated he lived in California for only nine months and relocated to Nevada. FTB concluded that Hyatt moved to Nevada in 1992 and assessed him $10.5 million in taxes and interest.

Hyatt sued FTB in Nevada alleging invasion of privacy, fraud, and intentional infliction of emotional distress, among other claims. In 2003 in Franchise Tax Board of California v. Hyatt the Supreme Court held that the constitution’s Full Faith and Credit Clause does not require Nevada to offer FTB the full immunity that California law provides.

A Nevada jury ultimately awarded Hyatt nearly $400 million in damages. The Nevada Supreme Court refused to apply Nevada’s statutory cap on damages to Hyatt’s fraud claim. According to the court, Nevada has a policy interest in ensuring adequate redress for Nevada citizens that overrides providing FTB the statutory cap because California operates outside the control of Nevada. The State and Local Legal Center (SLLC) filed an amicus brief arguing that states must extend the same immunities that apply to them to foreign state and local governments sued in their state courts.

Hyatt has also asked the Supreme Court to overrule Nevada v. Hall (1979), holding that a state may be sued in another state's courts without consent. If the Court overrules this case, the question of whether the immunities a state enjoys must be offered to a foreign state or local government will be moot.   

The SLLC amicus brief argues that Nevada purposely treating a California government agency worse than a similarly-situated Nevada government agency offends a core principle of the Constitution: that the states enjoy equal sovereignty. The SLLC brief also argues that the Nevada Supreme Court’s ruling creates a number of practical problems for state and local governments including encouraging plaintiffs to forum shop and exposing state and local governments to unpredictable litigation costs.

The SLLC brief does not take a position on whether Nevada v. Hall should be overruled. Interestingly, at the petition stage, 39 attorneys general, incuding Adam Paul Laxalt, signed onto West Virginia’s amicus brief asking the Court to overrule Nevada v. Hallf.

Quin Sorenson and Spencer Driscoll, Sidley Austin, Washington D.C. wrote the SLLC amicus brief which was joined by the Council of State Governments, the National Association of Counties, the National League of Cities, the United States Conference of Mayors, the International City/County Management Association, and the International Municipal Lawyers Association.

Lisa Soronen is the executive director of the State and Local Legal Center and writes frequently for the NCSL blog about the U.S. Supreme Court.

 

Posted in: Public Policy
Actions: E-mail | Permalink |

Subscribe to the NCSL Blog

Click on the RSS feed at left to add the NCSL Blog to your favorite RSS reader. 

About the NCSL Blog

This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.