FRANCHISE TAX BOARD OF CALIFORNIA v. HYATT ETAL.
| Decision Date | 23 April 2003 |
| Citation | 538 U.S. 488 |
| Court | U.S. Supreme Court |
FRANCHISE TAX BOARD OF CALIFORNIA v. HYATT ETAL.
CERTIORARI TO THE SUPREME COURT OF NEVADA No. 02-42. Argued February 24, 2003-Decided April 23, 2003
Respondent Hyatt's (hereinafter respondent) "part-year" 1991 California income-tax return represented that he had ceased to be a California resident and had become a Nevada resident in October 1991, shortly before he received substantial licensing fees. Petitioner California Franchise Tax Board (CFTB) determined that he was a California resident until April 1992, and accordingly issued notices of proposed assessments for 1991 and 1992 and imposed substantial civil fraud penalties. Respondent filed suit against CFTB in a Nevada state court, alleging that CFTB had directed numerous contacts at Nevada and had committed negligence and intentional torts during the course of its audit of respondent. In its motion for summary judgment or dismissal, CFTB argued that the state court lacked subject matter jurisdiction because full faith and credit and other legal principles required that the court apply California law immunizing CFTB from suit. Upon denial of that motion, CFTB petitioned the Nevada Supreme Court for a writ of mandamus ordering dismissal. The latter court ultimately granted the petition in part and denied it in part, holding that the lower court should have declined to exercise its jurisdiction over the underlying negligence claim under comity principles, but that the intentional tort claims could proceed to trial. Among other things, the court noted that Nevada immunizes its state agencies from suits for discretionary acts but not for intentional torts committed within the course and scope of employment and held that affording CFTB statutory immunity with respect to intentional torts would contravene Nevada's interest in protecting its citizens from injurious intentional torts and bad faith acts committed by sister States' government employees.
Held: The Full Faith and Credit Clause, U. S. Const., Art. IV, § 1, does not require Nevada to give full faith and credit to California's statutes providing its tax agency with immunity from suit. The full faith and credit command "is exacting" with respect to a final judgment rendered by a court with adjudicatory authority over the subject matter and persons governed by the judgment, Baker v. General Motors Corp., 522 U. S. 222, 233, but is less demanding with respect to choice of laws. The Clause does not compel a State to substitute the statutes of other States for its own statutes dealing with a subject matter concerning which it
489
is competent to legislate. E. g., Sun Oil Co. v. Wortman, 486 U. S. 717, 722. Nevada is undoubtedly competent to legislate with respect to the subject matter of the alleged intentional torts here, which, it is claimed, have injured one of its citizens within its borders. CFTB argues unpersuasively that this Court should adopt a "new rule" mandating that a state court extend full faith and credit to a sister State's statutorily recaptured sovereign immunity from suit when a refusal to do so would interfere with the State's capacity to fulfill its own sovereign responsibilities. The Court has, in the past, appraised and balanced state interests when invoking the Full Faith and Credit Clause to resolve conflicts between overlapping laws of coordinate States. See, e. g., Bradford Elec. Light Co. v. Clapper, 286 U. S. 145. However, this balancing-ofinterests approach quickly proved unsatisfactory and the Court abandoned it, Allstate Ins. Co. v. Hague, 449 U. S. 302, 308, n. 10, 322, n. 6, 339, n. 6, recognizing, instead, that it is frequently the case under the Clause that a court can lawfully apply either the law of one State or the contrary law of another, Sun Oil Co. v. Wortman, supra, at 727. The Court has already ruled that the Full Faith and Credit Clause does not require a forum State to apply a sister State's sovereign immunity statutes where such application would violate the forum State's own legitimate public policy. Nevada v. Hall, 440 U. S. 410, 424. There is no constitutionally significant distinction between the degree to which the allegedly tortious acts here and in Hall are related to a core sovereign function. States' sovereignty interests are not foreign to the full faith and credit command, but the Court is not presented here with a case in which a State has exhibited a "policy of hostility to the public Acts" of a sister State. Carroll v. Lanza, 349 U. S. 408,413. The Nevada Supreme Court sensitively applied comity principles with a healthy regard for California's sovereign status, relying on the contours of Nevada's own sovereign immunity from suit as a benchmark for its analysis. Pp.494-499.
Mfirmed.
Felix E. Leatherwood, Deputy Attorney General of California, argued the cause for petitioner. With him on the briefs were Bill Lockyer, Attorney General, Manuel M. Medeiros, State Solicitor, David S. Chaney, Senior Assistant Attorney General, and William Dean Freeman, Lead Supervising Deputy Attorney General.
H. Bartow Farr III argued the cause for respondents.
With him on the brief were Peter C. Bernhard and Donald J. Kula.*
JUSTICE O'CONNOR delivered the opinion of the Court. We granted certiorari to resolve whether the Nevada Supreme Court's refusal to extend full faith and credit to California's statute immunizing its tax collection agency from suit violates Article IV; § 1, of the Constitution. We conclude it does not, and we therefore affirm the judgment of the Nevada Supreme Court.
Respondent Gilbert P. Hyatt (hereinafter respondent) filed a "part-year" resident income tax return in California for 1991. App. to Pet. for Cert. 54. In the return, respondent represented that as of October 1, 1991, he had ceased to be a California resident and had become a resident of Nevada. In 1993, petitioner California Franchise Tax Board (CFTB) commenced an audit to determine whether respondent had underpaid state income taxes. Ibid. The audit focused on
*Eriefs of amici curiae urging reversal were filed for the State of Florida et al. by Richard E. Dornan, Attorney General of Florida, Jonathan A. Glogau, Barbara J. Ritchie, Acting Attorney General of Alaska, and Thomas R. Keller, Acting Attorney General of Hawaii, and by the Attorneys General for their respective jurisdictions as follows: Ken Salazar of Colorado, Richard Blumenthal of Connecticut, M. Jane Brady of Delaware, James E. Ryan of Illinois, Steve Carter of Indiana, G. Steven Rowe of Maine, J. Joseph Curran, Jr., of Maryland, Jennifer M. Granholm of Michigan, Mike Moore of Mississippi, Mike McGrath of Montana, Wayne Stenehjem of North Dakota, Betty D. Montgomery of Ohio, Anabelle Rodriguez of Puerto Rico, Mark L. Shurtleff of Utah, William H. Sorrell of Vermont, Jerry W Kilgore of Virginia, and Darrell V. McGraw, Jr., of West Virginia; for the Multistate Tax Commission by Frank D. Katz; and for the National Governors Association et al. by Richard Ruda and James
Sharon L. Browne filed a brief for the Pacific Legal Foundation as amicus curiae urging affirmance.
respondent's claim that he had changed residency shortly before receiving substantial licensing fees for certain patented inventions related to computer technology.
At the conclusion of its audit, CFTB determined that respondent was a California resident until April 3, 1992, and accordingly issued notices of proposed assessments for income taxes for 1991 and 1992 and imposed substantial civil fraud penalties. Id., at 56-57, 58-59. Respondent protested the proposed assessments and penalties in California through CFTB's administrative process. See Cal. Rev. & Tax. Code Ann. §§ 19041, 19044-19046 (West 1994).
On January 6, 1998, with the administrative protest ongoing in California, respondent filed a lawsuit against CFTB in Nevada in Clark County District Court. Respondent alleges that CFTB directed "numerous and continuous contacts ... at Nevada" and committed several torts during the course of the audit, including invasion of privacy, outrageous conduct, abuse of process, fraud, and negligent misrepresentation. App. to Pet. for Cert. 51-52, 54. Respondent seeks punitive and compensatory damages. Id., at 51-52. He also sought a declaratory judgment "confirm[ing] [his] status as a Nevada resident effective as of September 26, 1991," id., at 51, but the District Court dismissed the claim for lack of subject matter jurisdiction on April 16, 1999, App. 93-95.
During the discovery phase of the Nevada lawsuit, CFTB filed a petition in the Nevada Supreme Court for a writ of mandamus, or in the alternative, for a writ of prohibition, challenging certain of the District Court's discovery orders. While that petition was pending, CFTB filed a motion in the District Court for summary judgment or, in the alternative, for dismissal for lack of jurisdiction. CFTB argued that the District Court lacked subject matter jurisdiction because principles of sovereign immunity, full faith and credit, choice of law, comity, and administrative exhaustion all required that the District Court apply California law, under which:
"(b) An act or omission in the interpretation or application of any law relating to a tax." Cal. Govt. Code Ann. § 860.2 (West 1995).
The District Court denied CFTB's motion for summary judgment or dismissal, prompting CFTB to file a second petition in the Nevada Supreme Court. This petition sought a writ of mandamus ordering the dismissal of the case, or in the alternative, a writ of prohibition and mandamus limiting the scope of the suit to claims arising out of conduct that occurred in Nevada.
On June 13, 2001, the Nevada Supreme Court granted CFTB's second petition,...
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