California Franchise Tax Board v. Hyatt - Opinion Announcement

Argument of Speaker

Mr. Speaker: The opinion of the Court in No. 02-42, Franchise Tax Board of California versus Hyatt will be announced by Justice O’Connor.

Argument of Justice O’connor

Mr. O’connor: This case comes here on writ of certiorari to the Supreme Court of Nevada.

The respondent filed a part year income tax return in California in which he claimed he had left California and become a Nevada resident in October 1991.

Shortly before he received his income, some substantial licensing fees, the petitioner, California Tax Board conducted an audit and determined that respondent had been a California resident until April 1992.

As a result, the Tax Board issued tax assessments and imposed substantial civil fraud penalties.

The respondent, Hyatt filed suit against the Franchise Tax Board of California in Nevada State Court alleging that the Board had committed negligence and intentional torts during a course of the audit, some of which acts were alleged have been done in Nevada.

In a motion for summary judgment or dismissal, the Board argued that the Nevada Court lacks subject matter jurisdiction because the Full Faith and Credit Clause required Nevada Courts to apply a California statute that immunizes the State’s tax agency from suit.

When the Trial Court denied the motion, the petitioner sought writ of mandamus from the Nevada Supreme Court.

That Court granted the petition in part and denied it in part.

It held that the lower court should have declined to exercise jurisdiction over respondent’s negligence claim under principles of comity, but the intentional tort claims could proceed to trial.

The Court noted that Nevada immunizes its own state agencies from suits for discretionary acts but not for intentional torts.

That Court accordingly held that to afford petitioner’s statutory immunity with respect to intentional torts would contravene Nevada’s interest in protecting its citizens from bad faith acts committed by sister states' government employees.

We hold that the Constitution’s Full Faith and Credit Clause does not require Nevada to give full faith and credit to California statutes providing its tax agency with immunity from suit.

The Full Faith and Credit command does not compel a State to substitute the statutes of other states for its own statutes dealing with a subject matter concerning which it is competent to legislate.

Nevada is undoubtedly competent to legislate with respect to the subject matter of the alleged intentional torts here which it has claimed have injured one of its citizens within its borders.

We declined to adopt a new rule requiring State Courts to extend full faith and credit to a sister state’s immunity statutes when a refusal to do so would interfere with the states' capacity to fulfill its sovereign responsibilities.

In an earlier case, Nevada versus Hall, we ruled that the Full Faith and Credit Clause does not require a forum State to apply a sister State's sovereign immunity statute where such application would violate the Forum State’s own legitimate public policy

And we are not presented here with a case in which the forum State has exhibited a policy of hostility to the public acts of sister states.

The Nevada Supreme Court sensitively applied comity principles with a healthy regard for California’s sovereign status relying on the contours of Nevada’s own sovereign immunity from suit as a benchmark for its analysis.

The opinion is unanimous.