Franchise Tax Board of California v. Hyatt (2019) (States are immune from suit in the courts of other states)

Audio of Franchise Tax Board of California v. Hyatt (2019) Majority Opinion (States are immune from suit in the courts of other states)

 

Back in 1993, Gilbert Hyatt was an inventor, raking-in loads of cash from a patent he owned. When an auditor with the Franchise Tax Board of California learned about Hyatt's success, he decided to look into it. As you may have already guessed, the auditor found some discrepancies in Mr. Hyatt's accounting - so, he opened an audit on Hyatt's 1991 state tax return, finding even more discrepancies related to Hyatt's recent move from California to Nevada - so, he extended the audit to include California tax returns from 1992. As a result, the Franchise Tax Board of California found that Hyatt owed the state $1.8 million unpaid taxes, $1.4 million in penalties, and $1.2 million in interest for a total of $4.5 million for 1991. But, wait, there's more. The tax board also found Hyatt owed more than $6 million in taxes and interest for 1992, not including penalties.

Of course, Hyatt challenged the results of the audit - first with the Franchise Tax Board of California (without any luck) and then in California courts. In 1998, he sued the tax board for damages in Nevada state court.

Last episode, I read Nevada v. Hall (1979) a case in which the Court held that sovereign states can be sued in another state's courts without the first state's consent.

So, when Hyatt's case finally worked its way before the Supreme Court, the Franchise Tax Board of California asked the Court to reconsider Nevada v. Hall. In doing so, the Court determined that states are indeed immune from suit in the courts of other states, overruling the Court's forty-year-old precedent in Nevada v. Hall.

 

Music by Epidemic Sound