U.S. Supreme Court

Supreme Court splits on whether unwilling state can be hauled into another's court

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The U.S. Supreme Court has divided 4-4 on whether an unwilling state, California, can be sued by a private citizen in a Nevada court.

The split decision (PDF) on Tuesday leaves intact a 1979 decision that permits a state to be hauled into the courts of another state without its consent.

But the Supreme Court did resolve a second issue, ruling 6-2 that the Nevada court may not award damages that are higher than a citizen could obtain in a suit against Nevada’s own agencies.

Justice Stephen G. Breyer wrote the majority opinion in the case of Gilbert Hyatt, who had been accused of failing to pay $10 million in California taxes and penalties. Hyatt claims he moved to Nevada, where there is no state income tax, in 1991. California claimed the move occurred in 1992. Hyatt sued in Nevada courts, claiming the California tax board committed intentional torts in its audits when it looked through his private email and garbage, and examined his private activities at his place of worship.

A Nevada court awarded Hyatt nearly $500 million damages and fees. The Nevada Supreme Court trimmed the award to $1 million, even as it acknowledged a $50,000 damages cap would apply in suits against Nevada officials. The state supreme court reasoned the cap didn’t apply in Hyatt’s case because California’s efforts to control its agencies were inadequate as applied to Nevada citizens.

Breyer said that Nevada had applied a special rule of law applicable only in lawsuits against its sister states, reflecting a policy of hostility. As a result, Nevada’s damages award “reflects a special, and constitutionally forbidden” policy, Breyer said.

“Imagine, for example, that many or all states enacted such discriminatory, special laws, and justified them on the sole basis that (in their view) a sister state’s law provided inadequate protection to their citizens. Would each affected sister state have to change its own laws? Entirely? Piece-by-piece, in order to respond to the new special laws enacted by every other state? It is difficult to reconcile such a system of special and discriminatory rules with the Constitution’s vision of 50 individual and equally dignified states.”

Chief Justice John G. Roberts Jr. dissented in an opinion joined by Justice Clarence Thomas. The majority decision seems fair, Roberts wrote. “But, for better or worse, the word ‘fair’ does not appear in the full faith and credit clause.”

The case is Franchise Tax Board of California v. Hyatt.

Updated at 10:48 a.m. to correctly reference the state of Nevada.

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