## Facts

- Gilbert P. Hyatt, a former California resident who claimed to have moved to Nevada in 1991, was audited by the Franchise Tax Board of California (FTB) regarding his residency when he earned substantial income from patent licensing.
- The FTB concluded Hyatt did not become a Nevada resident until 1992 and assessed him for back taxes, penalties, and interest.
- Hyatt sued the FTB in Nevada state court for alleged tortious audit conduct, including intrusive and harassing investigative tactics directed at Hyatt and others.
- Nevada courts permitted the suit to proceed against California under then-existing precedent allowing a state to be sued in another state’s courts.
- After trial, a Nevada jury awarded Hyatt nearly $500 million; the Nevada Supreme Court reduced the award but left approximately $1 million in damages standing and declined to apply Nevada’s $50,000 statutory damages cap applicable to Nevada agencies.
- The Nevada Supreme Court justified refusing the cap on the ground that California’s internal constraints on the FTB were inadequate to protect Nevada citizens.

## Issues

1. Whether the Full Faith and Credit Clause permits a forum state to apply a damages regime against a sister state that is more burdensome than the forum applies to its own agencies in similar cases.
2. Whether the Court should overrule precedent permitting private suits against a state in another state’s courts without the defendant state’s consent.

## Decision

- The Court held that Nevada violated the Full Faith and Credit Clause by applying a special, discriminatory rule that exposed California to greater damages than Nevada would allow against its own agencies.
- The Court required Nevada, at minimum, to extend to California the same damages cap and related immunity limitations Nevada law affords Nevada agencies in comparable circumstances.
- The Court vacated the Nevada Supreme Court’s judgment to the extent it allowed damages exceeding what Nevada law would permit against Nevada agencies and remanded for further proceedings consistent with that rule.
- On whether to overrule the prior interstate-sovereign-immunity precedent, the Court was evenly divided, resulting in no controlling decision on that question.

## Legal Principles

- The Full Faith and Credit Clause forbids a state from singling out a sister state for harsher treatment than the forum state applies to itself in comparable litigation.
- A forum state that entertains private suits against a sister state may apply its own law, but it must do so without hostility or discrimination toward the sister state.
- At a minimum, the forum must apply the same damages limitations and immunities it provides its own agencies when adjudicating comparable claims against a sister state.
- An equally divided Supreme Court produces no precedential resolution of the disputed issue and leaves existing precedent in place.

## Conclusion

The Court held that Nevada could not impose a more onerous damages regime on California than Nevada applies to its own agencies, vacated the judgment permitting uncapped damages, and remanded for application of Nevada’s damages cap and related limitations on an equal basis.


Franchise Tax Bd. of Cal. v. Hyatt, 136 S. Ct. 1277 (2016)