Facts of the Case

Gilbert Hyatt filed a part-year resident income-tax return in California for 1991, which represented that he had become a Nevada resident in October 1991, shortly before he received substantial licensing fees. The California Franchise Tax Board (CFTB) determined that Hyatt was a California resident until April 1992 and issued notices of proposed assessments and imposed substantial civil fraud penalties. Hyatt filed suit against CFTB in a Nevada state court, alleging that CFTB had committed negligence and intentional torts during the course of its audit. CFTB argued that the state court lacked subject matter jurisdiction because full faith and credit required that the court apply California law immunizing CFTB from suit. Ultimately, the Nevada Supreme Court allowed the intentional tort claims to proceed to trial. The court held that affording CFTB statutory immunity with respect to intentional torts would contravene Nevada's interest in protecting its citizens from injurious intentional torts and bad faith acts committed by sister States' government employees.

Question

Does the Nevada Supreme Court's refusal to extend full faith and credit to California's statute immunizing its tax collection agency from suit violate the Full Faith and Credit Clause of the Constitution?

Conclusion

No. In a unanimous opinion delivered by Justice Sandra Day O'Connor, the court held that the Full Faith and Credit Clause does not require Nevada to give full faith and credit to California's statutes providing its tax agency with immunity from suit. Noting that Nevada did not grant immunity to its agencies for intentional torts, the Court reasoned that Nevada's interest in redressing intentional tortious conduct was sufficient to decline to accord full faith and credit to California's immunity of its tax agency to bar intentional tort claims. Accordingly, the Court refused to adopt a new rule mandating that a state court extend full faith and credit to a sister State's statutorily recaptured sovereign immunity from suit when a refusal to do so would interfere with the State's capacity to fulfill its own sovereign responsibilities.