Franchise Tax Bd. of Cal. v. Hyatt
The Court ruled that Nevada's courts could not award a man more in damages against a California tax agency than Nevada law would allow against its own state agencies in a similar lawsuit, calling Nevada's special, higher-damages rule for a sister state unconstitutional.
Separately, the Court split 4-4 on whether to overrule a 1979 precedent letting states be sued in another state's courts without their consent, leaving that precedent - and Nevada's power to hear the underlying lawsuit at all - unchanged.
How it got here: Nevada courts allowed the suit, a jury awarded huge damages, and the Nevada Supreme Court partly upheld the award; California sought Supreme Court review a second time.
The Case in Depth
What happened
Gilbert Hyatt says he moved from California to Nevada in 1991; California's tax agency claimed he actually moved in 1992 and pursued him for over $10 million in taxes, penalties, and interest, allegedly using invasive audit tactics like searching his garbage and mail. Hyatt sued the California tax agency in Nevada state court for these practices, and a Nevada jury awarded him roughly $500 million in damages and fees.
The question before the Court
When a Nevada jury awarded a man huge damages against a California tax agency, could Nevada give him more money than Nevada law would allow against its own state agencies?
Why it matters
The decision limits how far a state's courts can go in punishing another state's agencies beyond what its own laws allow, protecting states from being treated worse than the forum state treats itself. It also leaves intact, for now, states' ability to be sued in each other's courts without their consent, since the Court could not agree on overturning that rule.
What changes now
The case goes back to the Nevada courts, which must recalculate damages against California's tax agency consistent with the $50,000 cap that would apply to a similar suit against a Nevada agency. The separate question of whether states can be sued in other states' courts without consent remains unresolved because the Justices split evenly, so that issue could return to the Court in a future case.
What this does not decide
The Court did not decide whether states can be sued in another state's courts without their consent - the Justices were evenly divided on overruling that 1979 precedent, so it remains in place. The ruling addresses only the damages-cap issue, not broader questions about interstate lawsuits generally.
Concurrences and dissents
Concurrence — Justice Alito
Justice Alito agreed with the outcome that Nevada's damages award must be capped, but did not join the majority's reasoning, instead simply concurring in the judgment without writing a separate explanation.
Dissent — Justice Roberts
“If the majority is correct that Nevada has no sufficient policy justification for applying Nevada immunity law, then California law applies.”Roberts's objection that the majority invented a remedy not found in the Full Faith and Credit Clause.
Chief Justice Roberts argued that Nevada had a sufficient, legitimate policy reason for treating California's tax agency differently from its own agencies - namely, that Nevada's own agencies face legislative oversight and accountability that California's do not. He argued the majority's 'partial credit' remedy has no basis in the Clause's text, and that the Court should instead have required either full application of Nevada law or full application of California law, not a newly invented hybrid rule.
How the Court got there
The legal reasoning, step by step
- The Court applied the Constitution's Full Faith and Credit Clause, which requires states to respect each other's laws unless doing so would show a 'policy of hostility' toward another state's laws rather than just a legitimate, different policy choice of its own.
- Under the Court's earlier precedents, a state may apply its own law instead of a sister state's law when the two laws genuinely conflict and the state's choice reflects its own consistent policy, not disguised hostility toward the other state.
- The Court found that Nevada's usual immunity rules would have capped damages against its own agencies at $50,000, so applying that same limit to California would not have been a real conflict of policy at all - both states would have agreed on immunity above that amount.
- By instead inventing a special, higher-damages rule that applied only to lawsuits against sister states like California, Nevada abandoned its own ordinary legal principles solely to disadvantage California, which the Court treated as exactly the kind of hostility the Full Faith and Credit Clause forbids.
- The Court concluded this was not a revival of an old, complicated balancing test for conflicts between states' laws, but simply an application of the existing rule against one state singling out another state's laws for discriminatory treatment.
Doctrinal impact
Cases affected by this decision
Reaffirms Nevada v. Hall (440 U. S. 410)
The Court's 4-4 split left this precedent, allowing states to be sued in other states' courts without consent, in place.
Reaffirms Carroll v. Lanza (349 U. S. 408)
The Court relied on this case's rule against states adopting a 'policy of hostility' toward another state's laws.