__ U.S. __ (2016), 14-1175, Franchise Tax Bd. of California v. Hyatt

Docket Nº14-1175
Citation__ U.S. __, 136 S.Ct. 1277, 194 L.Ed.2d 431, 84 U.S.L.W. 4210
Opinion JudgeBreyer, Justice
Party NameFranchise Tax Board of California, Petitioner v. Gilbert P. Hyatt
AttorneyPaul D. Clement argued the cause for petitioner. H. Bartow Farr argued the cause for respondent.
Judge PanelBreyer, J., delivered the opinion of the Court, in which Kennedy, Ginsburg, Sotomayor, and Kagan, JJ., joined. Alito, J., concurred in the judgment. Roberts, C. J., filed a dissenting opinion, in which Thomas, J., joined. Justice Alito concurs in the judgment. Chief Justice Roberts, with whom Jus...
Case DateApril 19, 2016
CourtUnited States Supreme Court

Page __

__ U.S. __ (2016)

136 S.Ct. 1277, 194 L.Ed.2d 431, 84 U.S.L.W. 4210, 26 Fla.L.Weekly Fed. S 90

Franchise Tax Board of California, Petitioner

v.

Gilbert P. Hyatt

No. 14-1175

United States Supreme Court

April 19, 2016

Argued: December 7, 2015

ON WRIT OF CERTIORARI TO THE SUPREME COURT OF NEVADA

SYLLABUS

[136 S.Ct. 1278] [194 L.Ed.2d 432] Respondent Hyatt claims that he moved from California to Nevada in 1991, but petitioner Franchise Tax Board of California, a state agency, claims that he actually moved in 1992 and thus owes California millions in taxes, penalties, and interest. Hyatt filed suit in Nevada state court, which had jurisdiction over California under Nevada v. Hall, 440 U.S. 410, 99 S.Ct. 1182, 59 L.Ed.2d 416, seeking damages for California's alleged abusive audit and investigation practices. After this Court affirmed the Nevada Supreme Court's ruling that Nevada courts, as a matter of comity, would [194 L.Ed.2d 433] immunize California to the same extent that Nevada law would immunize its own agencies and officials, see Franchise Tax Bd. of Cal. v. Hyatt, 538 U.S. 488, 499, 123 S.Ct. 1683, 155 L.Ed.2d 702, the case went to trial, where Hyatt was awarded almost $500 million in damages and fees. On appeal, California argued that the Constitution's Full Faith and Credit Clause, Art. IV, § 1, required Nevada to limit damages to $50,000, the maximum that Nevada law would permit in a similar suit against its own officials. The Nevada Supreme Court, however, affirmed $1 million of the award and ordered a retrial on another damages issue, stating that the $50,000 maximum would not apply on remand.

Held :

1. The Court is equally divided on the question whether Nevada v. Hall should be overruled and thus affirms the Nevada courts' exercise of jurisdiction over California's state agency. P. 4.

2. The Constitution does not permit Nevada to apply a rule of Nevada law that awards damages against California that are greater than it could award against Nevada in similar circumstances. This conclusion is consistent with this Court's precedents. A statute is a " public Act" within the meaning of the Full Faith and Credit Clause. While a State is not required " to substitute for its own statute . . . the statute of another State reflecting a conflicting and opposed policy," Carroll v. Lanza, 349 U.S. 408, 412, 75 S.Ct. 804, 99 L.Ed. 1183, a State's decision to decline to apply another State's statute on this ground must not embody a " policy of hostility to the public Acts" of that other State, id., at 413, 75 S.Ct. 804, 99 L.Ed. 1183. Using this approach, the Court found no violation of the Clause in Carroll v. Lanza or in Franchise Tax Bd. the first time this litigation was considered. By contrast, the rule of unlimited damages applied here is not only " opposed" to California's law of complete immunity; it is also inconsistent with the general principles of Nevada immunity law, which limit damages awards to $50,000. Nevada explained its departure from those general principles by describing California's own system of controlling its agencies as an inadequate remedy for Nevada's citizens. A State that disregards its own ordinary legal principles on this ground employs a constitutionally impermissible " 'policy of hostility to the public Acts' of a sister State." 538 U.S., at 499, 123 S.Ct. 1683, 155 L.Ed.2d 702 . The Nevada Supreme Court's decision thereby lacks the " healthy [136 S.Ct. 1279] regard for California's sovereign status" that was the hallmark of its earlier decision. Ibid. This holding does not indicate a return to a complex " balancing-of-interests approach to conflicts of law under the Full Faith and Credit Clause." Id., at 496, 123 S.Ct. 1683, 155 L.Ed.2d 702. Rather, Nevada's hostility toward California is clearly evident in its decision to devise a special, discriminatory damages rule that applies only to a sister State. Pp. 4-9.

130 Nev. ___, 335 P.3d 125, vacated and remanded.

Paul D. Clement argued the cause for petitioner.

H. Bartow Farr argued the cause for respondent.

Breyer, J., delivered the opinion of the Court, in which Kennedy, Ginsburg, Sotomayor, and Kagan, JJ., joined. Alito, J., concurred in the judgment. Roberts, C. J., filed a dissenting opinion, in which Thomas, J., joined.

OPINION

[194 L.Ed.2d 434] Breyer, Justice

In Nevada v. Hall, 440 U.S. 410, 99 S.Ct. 1182, 59 L.Ed.2d 416 (1979), this Court held that one State (here, Nevada) can open the doors of its courts to a private citizen's lawsuit against another State (here, California) without the other State's consent. In this case, a private citizen, a resident of Nevada, has brought a suit in Nevada's courts against the Franchise Tax Board of California, an agency of the State of California. The board has asked us to overrule Hall and hold that the Nevada courts lack jurisdiction to hear this lawsuit. The Court is equally divided on this question, and we consequently affirm the Nevada courts' exercise of jurisdiction over California. See, e.g., Exxon Shipping Co. v. Baker, 554 U.S. 471, 484, 128 S.Ct. 2605, 171 L.Ed.2d 570 (2008) (citing Durant v. Essex Co., 74 U.S. 107, 7 Wall. 107, 112, 19 L.Ed. 154 (1869)).

California also asks us to reverse the Nevada court's decision insofar as it awards the private citizen greater damages than Nevada law would permit a private citizen to obtain in a similar suit against Nevada's own agencies. We agree that Nevada's application of its damages law in this case reflects a special, and constitutionally forbidden, " 'policy of hostility to the public Acts' of a sister State," namely, California. U.S. Const., Art. IV, § 1 (Full Faith and Credit Clause); Franchise Tax Bd. of Cal. v. Hyatt, 538 U.S. 488, 499, 123 S.Ct. 1683, 155 L.Ed.2d 702 (2003) (quoting Carroll v. Lanza, 349 U.S. 408, 413, 75 S.Ct. 804, 99 L.Ed. 1183 (1955)). We set aside the Nevada Supreme Court's decision accordingly.

I

Gilbert P. Hyatt, the respondent here, moved from California to Nevada in the early 1990's. He says that he moved to Nevada in September 1991. California's Franchise Tax Board, however, after an investigation and tax audit, claimed that Hyatt moved to Nevada later, in April 1992, and that he consequently owed California [136 S.Ct. 1280] more than $10 million in taxes, associated penalties, and interest.

Hyatt filed this lawsuit in Nevada state court against California's Franchise Tax Board, a California state agency. Hyatt sought damages for what he considered the board's abusive audit and investigation practices, including rifling through his private mail, combing through his garbage, and examining private activities at his place of worship. See App. 213-245, 267-268.

California recognized that, under Hall, the Constitution permits Nevada's courts to assert jurisdiction over California despite California's lack of consent. California nonetheless asked the Nevada courts to dismiss the case on other constitutional grounds. California law, it pointed out, provided state agencies with immunity from lawsuits based upon actions taken during the course of collecting taxes. Cal. Govt. Code Ann. § 860.2 (West 1995); see also § 860.2 (West 2012). It argued that the Constitution's Full Faith and Credit Clause required Nevada to apply California's sovereign immunity law to Hyatt's case. Nevada's Supreme Court, however, rejected California's claim. It held that Nevada's courts, as a matter of comity, would immunize California where Nevada law would [194 L.Ed.2d 435] similarly immunize its own agencies and officials ( e.g., for actions taken in the performance of a " discretionary" function), but they would not immunize California where Nevada law permitted actions against Nevada agencies, say, for acts taken in bad faith or for intentional torts. App. to Pet. for Cert. in Franchise Tax Bd. of Cal. v. Hyatt, O. T. 2002, No. 42, p. 12. We reviewed that decision, and we affirmed. Franchise Tax Bd.,

supra, at 499, 123 S.Ct. 1683, 155 L.Ed.2d 702.

On remand, the case went to trial. A jury found in Hyatt's favor and awarded him close to $500 million in damages (both compensatory and punitive) and fees (including attorney's fees). California appealed. It argued that the trial court had not properly followed the Nevada Supreme Court's earlier decision. California explained that in a similar suit against similar Nevada officials, Nevada statutory law would limit damages to $50,000, and it argued that the Constitution's Full Faith and Credit Clause required Nevada to limit damages similarly here.

The Nevada Supreme Court accepted the premise that Nevada statutes would impose a $50,000 limit in a similar suit against its own officials. See 130 Nev. ___, ___, 335 P.3d 125, 145-146 (2014); see also Nev. Rev. Stat. § 41.035(1) (1995). But the court rejected California's conclusion. Instead, while setting aside much of the damages award, it nonetheless affirmed $1 million of the award (earmarked as compensation for fraud), and it remanded for a retrial on the question of damages for intentional infliction of emotional distress. In doing so, it stated that " damages awarded on remand . . . are not subject to any statutory cap." 130 Nev., at ___, 335 P.3d, at 153. The Nevada Supreme Court explained its holding by stating that California's efforts to control the actions of its own agencies were inadequate as applied to Nevada's own citizens. Hence, Nevada's " policy interest in providing adequate redress to Nevada's citizens [wa]s paramount to providing [California] a statutory cap on damages under comity." Id., at ___, 335 P.3d, at 147.

California petitioned for certiorari. We agreed to decide two questions. First, whether to overrule Hall. And, second, if we did not do so,...

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28 practice notes
  • 393 P.3d 700 (N.M. 2017), S-1-SC-35214, Montano v. Frezza
    • United States
    • New Mexico Supreme Court of New Mexico
    • March 13, 2017
    ...that sovereign immunity has been retained by this state under our law. See Franchise Tax Bd. of Cal. v. Hyatt, __ U.S. __, __, 136 S.Ct. 1277, 1282-83, 194 L.Ed.2d 431 (2016). Otherwise we would be espousing an impermissible " special and discriminatory rule[]"......
  • Diagonal Public Enforcement.
    • United States
    • Stanford Law Review Vol. 70 Nbr. 4, April 2018
    • April 1, 2018
    ...law and New York courts in an insurance contract). (105.) See 440 U.S. 410,424-27 (1979). (106.) See Franchise Tax Bd. of Cal. v. Hyatt, 136 S. Ct. 1277,1279 (2016) (noting that the eight-Justice Court was equally divided on whether to overrule Halt). (107.) I treat public nuisance cases as......
  • Competing Exclusionary Rules in Multistate Investigations: Resolving Conflicts of State Search-and-Seizure Law.
    • United States
    • Yale Law Journal Vol. 127 Nbr. 2, November 2017
    • November 1, 2017
    ...another state, but the Court's primary concern was the sovereign status of California, a party to the case. Franchise Tax Bd. v. Hyatt, 136 S. Ct. 1277,1279 (2016) (quoting Carroll v. Lanza, 349 U.S. 408, 413 (1955)). (90.) Robert H. Jackson, Full Faith and Credit--The Lawyer's Clause of th......
  • Case Baiting
    • United States
    • American Business Law Journal Nbr. 57-2, June 2020
    • June 1, 2020
    ...e.g., Brief of Indiana and 43 Other States as Amici Curiae in Support of Petitioner, at2–3, Franchise TaxBd. v. Hyatt, 136 S. Ct. 1277 (2016) (No. 17-1299) (arguing that a prece-dent dealing with the sovereign immunity of the states was wrongly decided and should beoverruled); Brief for the......
  • Request a trial to view additional results
23 cases
  • 393 P.3d 700 (N.M. 2017), S-1-SC-35214, Montano v. Frezza
    • United States
    • New Mexico Supreme Court of New Mexico
    • March 13, 2017
    ...that sovereign immunity has been retained by this state under our law. See Franchise Tax Bd. of Cal. v. Hyatt, __ U.S. __, __, 136 S.Ct. 1277, 1282-83, 194 L.Ed.2d 431 (2016). Otherwise we would be espousing an impermissible " special and discriminatory rule[]"......
  • 60 Misc.3d 274, 2018-28130, Hala v. Orange Regional Medical Center
    • United States
    • April 23, 2018
    ...application would violate the forum state’s own legitimate public policy (Franchise Tax Bd. of California v. Hyatt, __ U.S. __, 136 S.Ct. 1277, 194 L.Ed.2d 431 [2016] ). Here, imposing a stay would improperly enforce an order that violates the strong public policy o......
  • Mobley v. State, 010719 TNCIV, W2017-02356-COA-R3-CV
    • United States
    • Tennessee Court of Appeals of Tennessee
    • January 7, 2019
    ...comity argument, which is discussed in the following section of this opinion. [4] In Franchise Tax Bd. of California v. Hyatt, 136 S.Ct. 1277, 1279 (2016), the Supreme Court was equally divided 4-4 as to whether Nevada v. Hall should be overruled. After the decision on r......
  • 16 Cal.App.5th 1180, D071752, Oregon State University v. Superior Court (George R. Sutherland)
    • United States
    • California California Court of Appeals
    • November 8, 2017
    ...I ).) A statute is a public act under this provision. (Franchise Tax Bd. v. Hyatt (2016) __ U.S. __, 136 S.Ct. 1277, 1281, 194 L.Ed.2d 431 (Hyatt II ).) Consequently, the Oregon Tort Claims Act, including its claims notice provision, is entitled to full faith and credit&......
  • Request a trial to view additional results
2 firm's commentaries
  • Stare Decisis Strikes Out At The Supreme Court
    • United States
    • JD Supra United States
    • May 14, 2019
    ...Clause required Nevada courts to grant the Board the same immunity that Nevada agencies enjoy. Franchise Tax Bd. of Cal. v. Hyatt, 136 S. Ct. 1277 (2016). In the third decision, the Supreme Court overturned Nevada v. Hall, 440 U. S. 410 (1979) in which it had held the United States Constitu......
  • 'Hyatt 3' Oral Argument And Potential State Tax Implications
    • United States
    • JD Supra United States
    • April 22, 2019
    ...target="_blank">, 136 S. Ct. 1277 (2016). [3] Chisholm v. Georgia ...
3 books & journal articles
  • Diagonal Public Enforcement.
    • United States
    • Stanford Law Review Vol. 70 Nbr. 4, April 2018
    • April 1, 2018
    ...law and New York courts in an insurance contract). (105.) See 440 U.S. 410,424-27 (1979). (106.) See Franchise Tax Bd. of Cal. v. Hyatt, 136 S. Ct. 1277,1279 (2016) (noting that the eight-Justice Court was equally divided on whether to overrule Halt). (107.) I treat public nuisance cases as......
  • Competing Exclusionary Rules in Multistate Investigations: Resolving Conflicts of State Search-and-Seizure Law.
    • United States
    • Yale Law Journal Vol. 127 Nbr. 2, November 2017
    • November 1, 2017
    ...another state, but the Court's primary concern was the sovereign status of California, a party to the case. Franchise Tax Bd. v. Hyatt, 136 S. Ct. 1277,1279 (2016) (quoting Carroll v. Lanza, 349 U.S. 408, 413 (1955)). (90.) Robert H. Jackson, Full Faith and Credit--The Lawyer's Clause of th......
  • Case Baiting
    • United States
    • American Business Law Journal Nbr. 57-2, June 2020
    • June 1, 2020
    ...e.g., Brief of Indiana and 43 Other States as Amici Curiae in Support of Petitioner, at2–3, Franchise TaxBd. v. Hyatt, 136 S. Ct. 1277 (2016) (No. 17-1299) (arguing that a prece-dent dealing with the sovereign immunity of the states was wrongly decided and should beoverruled); Brief for the......