May 13, 2019

Supreme Court Decides Franchise Tax Board of California v. Hyatt

On May 13, 2019, the Supreme Court decided Franchise Tax Board of California v. Hyatt, No. 17-1299, holding that a private party may not sue a non-consenting state in another state’s courts.

In Nevada v. Hall, 440 U.S. 410 (1979), the Court held that a state may open its courts to a private citizen’s suit against another state without that state’s consent. Relying on Hall, Hyatt, a Nevada citizen, sued the Franchise Tax Board of California (a state agency) in Nevada state court. Hyatt alleged that the Board had engaged in abusive practices in investigating and auditing his taxes. California did not consent to the suit. After protracted litigation, including two previous decisions by the U.S. Supreme Court, the Nevada Supreme Court upheld entry of judgment on a jury’s verdict against the Board.

The Board appealed to the Supreme Court, arguing that the Court should overrule Hall and hold that a private party may not sue a non-consenting state in another state’s courts. The Supreme Court agreed with the Board and overruled Hall. The Court stated that at the time of the founding, it was well settled under common law that states were immune from lawsuits unless they waived that immunity or the Constitution abrogated it. Article III abrogated states’ immunity in certain ways (for example, by providing a federal forum for lawsuits by one state against another), but never abrogated their immunity from lawsuits by private citizens in other states’ courts. The Court rejected Hyatt’s argument that interstate sovereign immunity exists only as a matter of comity and can be disregarded by the forum state on the ground that the Constitution altered the states’ relationships to one another in a way that they do not remain true sovereigns with the power to independently decide the scope of a sister state’s immunity. The Court also rejected Hyatt’s arguments that the Court had decided the question in one of its earlier decisions in the case and that California had waived its right to invoke immunity in any event. The Court concluded that Hall was inconsistent with “the historical understanding of state sovereign immunity” and the Court’s sovereign-immunity jurisprudence, so the Court declined to apply stare decisis and overruled Hall. It thus reversed the judgment of the Nevada Supreme Court and remanded the suit for proceedings consistent with its opinion.

Justice Thomas announced the judgment of the Court. Justice Breyer filed a dissenting opinion, in which Justices Ginsburg, Sotomayor, and Kagan joined.

Download Opinion of the Court.

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