Supreme Court: One State Can't Be Sued in Another State's Court

by | May 14, 2019 AT 8:36 AM

By David G. Savage

The Supreme Court on Monday ended a 28-year-old tax battle between California and a wealthy inventor who moved to Nevada by broadly shielding states from private lawsuits filed in other states.

The 5-4 ruling is both a win for the California Franchise Tax Board and a victory for the conservative principle of state "sovereign immunity."

The decision by Justice Clarence Thomas overturned a 40-year-old precedent to now "hold that states retain their sovereign immunity from private suits brought in the courts of other states."

The case began in 1991 when Gilbert Hyatt, a California resident, began earning millions in royalties from a computer patent. He sold his house and rented an apartment in Nevada. And when he filed his tax returns in 1991 and 1992, he claimed his primary residence was Nevada, which had no tax state income tax.

California tax authorities thought his move was a sham and launched an investigation, including in Nevada, to show he maintained his residence in California.

Hyatt then sued the California tax authorities in the Nevada courts and won a series of large judgments.

California's lawyers continued to fight the claims from the Nevada courts. And Monday, they finally prevailed in the case of Franchise Tax Board vs. Hyatt.

Thomas said the framers of the Constitution had an "understanding that states retained immunity from private suits, both in their own courts and in other courts."

In the 1990s, the high court's conservative majority handed down a series of decisions that shielded states from anti-discrimination claims filed by their residents.

The four dissenting justices said lawsuits of this sort were extremely rare, and they faulted the majority for overruling a 1979 precedent that permitted such claims to go forward.

(c)2019 Los Angeles Times