Franchise Tax Bd. of Cal. v. Hyatt

Background

A Nevada resident said he stopped being a California resident in late 1991 and filed a part‑year tax return. California’s tax agency audited him, concluded he remained a California resident into 1992, and assessed taxes and penalties. While the California administrative protest was pending, the man sued the California tax board in Nevada for alleged wrongs during the audit, including invasion of privacy, abuse of process, fraud, and negligent misrepresentation. California law expressly shields its tax agency from suit; Nevada law does not protect agencies for intentional torts.

Reasoning

The central question was whether the Constitution’s Full Faith and Credit requirement forces Nevada to apply California’s statute that bars suit against its tax board. The Court explained that the clause does not compel one State to substitute another State’s statutes for its own laws on subjects it can legislate. The Court declined to adopt a new rule forcing forum States to yield when a sister State claims interference with sovereign functions. Relying on prior decisions, the Court held Nevada could apply its own law and refused to require recognition of California’s blanket immunity. The Court affirmed the Nevada Supreme Court’s approach.

Real world impact

The ruling allows Nevada courts to hear certain intentional tort claims against a sister State’s tax agency without being forced to apply California’s immunity law. It does not resolve the underlying tort claims on the merits and does not create a new nationwide rule requiring States to honor sister‑State immunity statutes in every case.