January 2019 Preview | Franchise Tax Board of California v. Hyatt

Case No. 17-1299, Nev.

Preview by Samuel E. Meredith, Senior Online Editor

Faithful SCOTUS fans will recall that the Court decided last term to abandon one of its precedents in South Dakota v. Wayfair. This term, in Hyatt, the Court will once again decide whether one of its prior decisions should be overturned.

The underlying dispute in Hyatt began over 20 years ago when the Franchise Tax Board of California (“the FTB”) launched an investigation to determine whether Hyatt, who by then was living in Nevada, owed back taxes from when he lived in California. Several years after the audit began, Hyatt, citing investigatory misconduct, filed a number of tort claims against the FTB in Nevada state court. Constitutional disputes (and two visits to the Supreme Court) followed. When the case proceeded to trial, a jury ruled in favor of Hyatt on each of his claims. The Nevada Supreme Court reversed some of these findings but affirmed others.

This time, the parties’ dispute before the Court stems from Nevada v. Hall, 440 U.S. 410 (1979), in which the Court ruled that a state may be held fully liable in the courts of another state. The continued viability of Hall was among the issues presented in Hyatt’s second visit to the Court, but a deadlock among the Justices left the ruling of the court below in place. The Court’s treatment of Hall this time around will determine the validity of the outstanding judgments against the FTB.

The FTB contends that Hall was incorrectly decided because “a considerable body of historical evidence establishes that the Framers did not intend to abrogate States’ immunity in courts of other States.” Brief for Petitioner, Franchise Tax Board of Cal. v. Hyatt, No. 17-1299 (U.S. filed Sept. 11, 2018). To support this conclusion, the FTB points to cases predating the Constitution, and argues that the Constitution did nothing to disrupt the sovereign immunity framework embodied in those cases. The FTB further asserts that Hall should be overturned because it “has proven impracticable in its ‘real world implementation.’” Id. at 39 (quoting South Dakota v. Wayfair, 138 S. Ct. 2080, 2097 (2018)).

Hyatt, on the other hand, argues that this dispute should have never been brought to the Court in the first place, citing “the law of the case doctrine.” Brief for Respondent at 12, Franchise Tax Board of Cal. v. Hyatt, No. 17-1299 (U.S. filed Nov. 15, 2018). Alternatively, Hyatt argues that the FTB “waived the ability to ask for Nevada v. Hall to be overruled” by failing to raise the issue when the parties were before the Court for the first time. On the merits, Hyatt avers that the FTB “has failed to provide the ‘compelling justification’ for overruling a long-standing precedent.” Id. at 18.