Franchise Tax Bd. of Cal. v. Hyatt
| Citation | 335 P.3d 125,130 Nev. Adv. Op. 71 |
| Decision Date | 18 September 2014 |
| Docket Number | No. 53264.,53264. |
| Parties | FRANCHISE TAX BOARD OF the STATE of California, Appellant/Cross–Respondent, v. Gilbert P. HYATT, Respondent/Cross–Appellant. |
| Court | Supreme Court of Nevada |
335 P.3d 125
130 Nev. Adv. Op. 71
FRANCHISE TAX BOARD OF the STATE of California, Appellant/Cross–Respondent
v.
Gilbert P. HYATT, Respondent/Cross–Appellant.
No. 53264.
Supreme Court of Nevada.
Sept. 18, 2014.
Lemons, Grundy & Eisenberg and Robert L. Eisenberg, Reno; McDonald Carano Wilson LLP and Pat Lundvall, Carla Higginbotham, and Megan L. Starich, Reno, for Appellant/Cross–Respondent.
Kaempfer Crowell Renshaw Gronauer & Fiorentino and Peter C. Bernhard, Las Vegas; Hutchison & Steffen, LLC, and Mark A. Hutchison and Michael K. Wall, Las Vegas; Lewis Roca Rothgerber LLP and Daniel F. Polsenberg, Las Vegas; Perkins Coie LLP and Donald J. Kula, Los Angeles, CA, for Respondent/Cross–Appellant.
Catherine Cortez Masto, Attorney General, and C. Wayne Howle, Solicitor General, Carson City, for Amicus Curiae State of Nevada.
Dustin McDaniel, Attorney General, Little Rock, AR, for Amicus Curiae State of Arkansas.
John V. Suthers, Attorney General, Denver, CO, for Amicus Curiae State of Colorado.
Joseph R. “Beau” Biden III, Attorney General, and Richard S. Gebelein, Chief Deputy Attorney General, Wilmington, DE, for Amicus Curiae State of Delaware.
Bill McCollum, Attorney General, Tallahassee, FL, for Amicus Curiae State of Florida.
Lawrence G. Wasden, Attorney General, Boise, ID, for Amicus Curiae State of Idaho.
Shone T. Pierre, Baton Rouge, LA, for Amicus Curiae Louisiana Secretary and the Louisiana Department of Revenue.
Janet T. Mills, Attorney General, Augusta, ME, for Amicus Curiae State of Maine.
Douglas F. Gansler, Attorney General, Baltimore, MD, for Amicus Curiae State of Maryland.
Chris Koster, Attorney General, Jefferson City, MO, for Amicus Curiae State of Missouri.
Anne Milgram, Attorney General, Trenton, NJ, for Amicus Curiae State of New Jersey.
Donnita A. Wald, General Counsel, Bismarck, ND, for Amicus Curiae North Dakota State Tax Commissioner Cory Fong.
Richard Cordray, Attorney General, Columbus, OH, for Amicus Curiae State of Ohio.
W.A. Drew Edmondson, Attorney General, Oklahoma City, OK, for Amicus Curiae State of Oklahoma.
Robert E. Cooper, Jr., Attorney General and Reporter, Nashville, TN, for Amicus Curiae State of Tennessee.
John Swallow, Attorney General, and Clark L. Snelson, Assistant Attorney General, Salt Lake City, UT, for Amicus Curiae State of Utah.
William H. Sorrell, Attorney General, Montpelier, VT, for Amicus Curiae State of Vermont.
William C. Mims, Attorney General, Richmond, VA, for Amicus Curiae State of Virginia.
Robert M. McKenna, Attorney General, Olympia, WA, for Amicus Curiae State of Washington.
Shirley Sicilian, General Counsel, Washington, DC, for Amicus Curiae Multistate Tax Commission.
BEFORE THE COURT EN BANC.1
OPINION
By the Court, HARDESTY, J.:
In 1998, inventor Gilbert P. Hyatt sued the Franchise Tax Board of the State of California (FTB) seeking damages for intentional torts and bad-faith conduct committed by FTB auditors during tax audits of Hyatt's 1991 and 1992 state tax returns. After years of litigation, a jury awarded Hyatt $139 million in damages on his tort claims and $250 million in punitive damages. In this appeal, we must determine, among other issues, whether we should revisit our exception to government immunity for intentional torts and bad-faith conduct as a result of this court's adoption of the federal test for discretionary-function immunity, which shields a government entity or its employees from suit for discretionary acts that involve an element of individual judgment or choice and that are grounded in public policy considerations. We hold that our exception to immunity for intentional torts and bad-faith conduct survives our adoption of the federal discretionary-function immunity test because intentional torts and bad-faith conduct are not based on public policy.
Because FTB cannot invoke discretionary-function immunity to protect itself from Hyatt's intentional tort and bad-faith causes of action, we must determine whether Hyatt's claims for invasion of privacy, breach of confidential relationship, abuse of process, fraud, and intentional infliction of emotional distress survive as a matter of law, and if so, whether they are supported by substantial evidence. All of Hyatt's causes of action, except for his fraud and intentional infliction of emotion distress claims, fail as a matter of law, and thus, the judgment in his favor on these claims is reversed.
As to the fraud cause of action, sufficient evidence exists to support the jury's findings that FTB made false representations to Hyatt regarding the audits' processes and that Hyatt relied on those representations to his detriment and damages resulted. In regard to Hyatt's claim for intentional infliction of emotional distress, we conclude that medical records are not mandatory in order to establish a claim for intentional infliction of emotional distress if the acts of the defendant are sufficiently severe. As a result,
substantial evidence supports the jury's findings as to liability, but evidentiary and jury instruction errors committed by the district court require reversal of the damages awarded for emotional distress and a remand for a new trial as to the amount of damages on this claim only.
In connection with these causes of action, we must address whether FTB is entitled to a statutory cap on the amount of damages that Hyatt may recover from FTB on the fraud and intentional infliction of emotional distress claims under comity. We conclude that Nevada's policy interest in providing adequate redress to its citizens outweighs providing FTB a statutory cap on damages under comity, and therefore, we affirm the $1,085,281.56 of special damages awarded to Hyatt on his fraud cause of action and conclude that there is no statutory cap on the amount of damages that may be awarded on remand on the intentional infliction of emotional distress claim.
We also take this opportunity to address as a matter of first impression whether, based on comity, it is reasonable to provide FTB with the same protection of California law, to the extent that it does not conflict with Nevada law, to grant FTB immunity from punitive damages. Because punitive damages would not be available against a Nevada government entity, we hold, under comity principles, that FTB is immune from punitive damages. Thus, we reverse that portion of the district court's judgment awarding Hyatt punitive damages.
For the reasons discussed below, we affirm in part, reverse in part, and remand this case to the district court for further proceedings.
FACTS AND PROCEDURAL HISTORY
California proceedings
In 1993, after reading a newspaper article regarding respondent/cross-appellant Hyatt's lucrative computer-chip patent and the large sums of money that Hyatt was making from the patent, a tax auditor for appellant/cross-respondent FTB decided to review Hyatt's 1991 state income tax return. The return revealed that Hyatt did not report, as taxable income, the money that he had earned from the patent's licensing payments and that he had only reported 3.5 percent of his total taxable income for 1991. Hyatt's tax return showed that he had lived in California for nine months in 1991 before relocating to Las Vegas, Nevada, but Hyatt claimed no moving expenses on his 1991 tax return. Based on these discrepancies, FTB opened an audit on Hyatt's 1991 state income tax return.
The 1991 audit began when Hyatt was sent notice that he was being audited. This notification included an information request form that required Hyatt to provide certain information concerning his connections to California and Nevada and the facts surrounding his move to Nevada. A portion of the information request form contained a privacy notice, which stated in relevant part that “The Information Practices Act of 1977 and the federal Privacy Act require the Franchise Tax Board to tell you why we ask you for information. The Operations and Compliance Divisions ask for tax return information to carry out the Personal Income Tax Law of the State of California.” Also included with the notification was a document containing a list of what the taxpayer could expect from FTB: “Courteous treatment by FTB employees[,] Clear and concise requests for information from the auditor assigned to your case[,] Confidential treatment of any personal and financial information that you provide to us [,] Completion of the audit within a reasonable amount of time[.]”
The audit involved written communications and interviews. FTB sent over 100 letters and demands for information to third parties including banks, utility companies, newspapers (to learn if Hyatt had subscriptions), medical providers, Hyatt's attorneys, two Japanese companies that held licenses to Hyatt's patent (inquiring about payments to Hyatt), and other individuals and entities that Hyatt had identified as contacts. Many, but...
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