SCOTUS Opinion: States Are Immune From Private Suits Filed In Other States

Gilbert Hyatt made millions from a technology patent he developed while living in California. Prior to receiving the patent, he moved to Nevada, which has no income tax. The Franchise Tax Board of California thought his move was a sham, and began auditing him. Hyatt sued the Board in Nevada, claiming that the Board had committed numerous torts during its audit. The Board argued that under the Full Faith and Credit Clause of the Constitution, it should be immune from suit in Nevada. The Nevada courts rejected that premise, and in 2003 the Supreme Court unanimously affirmed Nevada’s position. On remand, after a jury trial, Hyatt won, and the Nevada courts awarded him more damages than that state’s cap on damage awards against its own agencies. In 2016, the U.S. Supreme Court reversed, holding that the Full Faith and Credit Clause required Nevada to grant the Board the same cap limitation that its own agencies enjoyed. On remand, the Board argued that the case of Nevada v. Hall, 440 U.S. 410 (1979), in which the Court ruled that the Constitution allowed a state to be sued by a private party in the courts of another state, should be overruled, and the Board be held immune from Hyatt’s suit in Nevada’s courts. In Franchise Tax Board of California v. Hyatt, in a 5-4 majority opinion by Justice Thomas, the Court overruled Hall and held that states retain their sovereign immunity from private suits brought in the courts of other states. The majority found that the Hall decision misread the historical record, which supported the concept of the states as sovereign entities within a federal system, and declined to apply stare decisis, describing Hall as an “outlier.” Hyatt’s lengthy litigation battle with the Board thus came to an empty end. Justice Breyer, joined by Justices Ginsburg, Sotomayor, and Kagan, dissented, arguing that there was “no good reason to overrule Hall,” and that stare decisis required keeping it on as precedent. A link to the opinion is here.