At stake in Franchise Tax Board of California v. Hyatt—a case that has already been to the high court once before, making it one of the rare "SCOTUS repeaters"—is an important question of state sovereign immunity. Over the years, the Supreme Court has held that states have immunity from proceedings in federal courts, in their own respective state courts, and before federal agencies. But in a 1979 decision concerning an accident in California involving a vehicle owned by the State of Nevada, the Supreme Court held that states do not have immunity in the courts of other states. Whether the Court should overrule that case—Nevada v. Hall—is squarely at issue in Hyatt. (Full disclosure: As Solicitor General for the State of West Virginia, I am counsel of record on a 44-state amicus brief supporting the Franchise Tax Board of California.)
The somewhat tortured history of Hyatt is described well here. In short, Gilbert Hyatt is an inventor who lives in Nevada but previously lived in California. The California tax agency claimed that Hyatt failed to pay some taxes in 1991. At some point, Hyatt sued the California agency in Nevada state court, alleging a number of torts, including invasion of privacy and intentional infliction of emotional distress.
The case first made its way to the Supreme Court in 2003, on a Full Faith and Credit Clause issue. The tax board argued that Nevada courts were required, under the FF&C Clause, to extend to it the same immunity to which it was entitled in California courts. The Supreme Court rejected that claim, though several justices questioned at oral argument whether Nevada v. Hall should instead be overruled. The Court ultimately did not revisit Hall because the tax board had not asked it to do so.
This time around, the tax board has explicitly called for the overruling of Nevada v. Hall in two questions presented. The first question is a follow-on to the FF&C issue litigated the first time the Hyatt case was at the Court. The tax board argues that even if Nevada courts are not required to extend to the tax board the immunity it would have received at home in California, the Nevada courts must extend to out-of-state agencies the same immunity to which Nevada's own agencies are entitled. The second question is whether Nevada v. Hall should be overruled.
Supported by several amicus briefs (including one from 44 states), the California tax board argued that Nevada v. Hall is inconsistent with the historical understanding of state sovereign immunity, the Court's prior decisions, and the Court's recent sovereign immunity jurisprudence. The tax board described the case as a "constitutional anomaly" that is "too odd to sustain," highlighting that "the historical record clearly demonstrates that States were not subject to involuntary suit in other States' courts."
In response, Hyatt contended that the Court should adhere to its 36-year-old precedent. Looking to history, Hyatt urged that sovereigns were not entitled to immunity as of right in the courts of other sovereigns, but rather only with the consent of the home sovereign. Hyatt relied primarily on an 1812 case called Schooner Exchange v. McFaddon—which was also the primary basis for Nevada v. Hall. In addition, Hyatt urged the Court to uphold Hall as a matter of stare decisis, arguing that the tax board had not advanced any "special justification" for overturning Hall. Responding to the argument that Hall permits state courts to subject sister states to burdensome judgments, Hyatt contended that states could simply enter into bilateral or multilateral agreements for immunity.
At argument, two heavyweights of the Supreme Court bar squared off: Paul Clement for the California tax board and H. Bartow Farr for Hyatt. As SCOTUSblog summarized, the tax board may have earned Justice Kennedy's potentially tie-breaking vote. Much of the argument focused on whether states could simply enter into agreements for immunity—as suggested by Hyatt in his brief—and Justice Kennedy didn't seem to buy it.
To Farr's suggestion that states could enter such agreements, Justice Kennedy said:
[T]hat seems to me quite disruptive of the union that the Congress contemplates in that States would make different arrangements with each other. Maybe they would freeze other States out. You would have States bargaining with each other. It seems to me that causes great dissension.
Justice Kennedy continued:
Do you say we're just going to throw the States back on themselves; all the States negotiate with each other? That's not part of our constitutional tradition at all.
This perhaps should not come as a surprise, as Justice Kennedy was among those justices who questioned the correctness of Nevada v. Hall the first time that Hyatt was before the Court in the 2002 Term. He said then (also to Farr, who was Hyatt's counsel then as now):
[I]t's very odd to me that California can't be sued in its own courts and it can't be sued in a federal court, but it can be sued in a Nevada court.
We will see whether that oddness will lead Justice Kennedy and at least four other justices to conclude that Hall is -- as the tax board argued in its brief -- "too odd to sustain."