Franchise Tax Board Of California v. Hyatt

139 S.Ct. 1485 (2019)

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Nature of the Case

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Facts

P earned substantial income from a technology patent for a computer formed on a single integrated circuit chip. The royalties in the interim totaled millions of dollars. Prior to receiving the patent, P had been a long-time resident of California. In 1991, P 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, as his primary place of residence. In 1993, D launched an audit. Employees of D traveled to Nevada to conduct interviews with Hyatt’s estranged family members and shared his personal information with business contacts. D sent more than 100 letters and demands for information to third parties. D concluded that P had not moved to Nevada until April 1992 and owed California more than $10 million in back taxes, interest, and penalties. P protested the audit before D, 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, P sued D in Nevada state court for torts he alleged the agency committed during the audit. D petitioned the Nevada Supreme Court for a writ of mandamus ordering dismissal on the ground that the State of California was immune from suit. D argued that, under the Full Faith and Credit Clause, Nevada courts must apply California’s statute immunizing D from liability for all injuries caused by its tax collection. The Nevada Supreme Court rejected 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. The Supreme Court unanimously affirmed, holding that the Full Faith and Credit Clause did not prohibit Nevada from applying its own immunity law to the case. P got the verdict with prejudgment interest and costs, that exceeded $490 million. On appeal, the Nevada Supreme Court upheld only a $1 million judgment. The Supreme Court again granted certiorari and this time reversed, holding that the Full Faith and Credit Clause required Nevada courts to grant D the same immunity that D agencies enjoy. On remand, the Nevada Supreme Court instructed the trial court to enter damages in accordance with the statutory cap for Nevada agencies. The Supreme Court granted D’s petition for certiorari on whether Nevada v. Hall should be overruled.