Franchise Tax Board of California v. Hyatt: State Sovereign Immunity in the Balance

• In Event: Tax Issues, International and More

Abstract

Franchise Tax Board of California v. Hyatt:
State Sovereign Immunity in the Balance

Abstract

Whether states have sovereign immunity, or whether they may be involuntarily haled into court by citizens of that or any sister states, has been in flux since the time of our founding.
In Franchise Tax Board v. Hyatt, the Supreme Court was asked to opine on two issues: (1) whether Nevada v. Hall, which held that a sovereign state can be involuntarily haled into the courts of another state, should be overruled, and if Nevada v. Hall should not be overruled, (2) whether a state must extend to sister states haled into its courts the same immunities regarding damage awards that apply to cases arising in within the state.
At issue was nearly $500 million in damages and fees awarded in Nevada’s court to Hyatt, a Nevada resident, from the California Franchise Tax Board. The impact of this case is far-reaching in determining not only whether states and state agencies may be haled into the courts of sister states, but also in determining the extent of awards which may be levied against them.
Arguments for this case were heard on December 7, 2015, the decision on April 19, 2016. In the interim, Justice Antonin Scalia, one of the most conservative justices, passed away. As a result there was an even split on the first issue, which required a decision on the second issue. This paper discusses the history of state sovereign immunity in the Court, the Court’s reasoning in the present case, as well as Justice Scalia’s stance on state sovereign immunity and the implications of his absence on this and future sovereign immunity cases.

Key words: federalism; sovereign immunity; state agencies; tax authorities; tort awards.

Author

• Monique O Durant, Central Connecticut State University