Nevada must treat California agency like a Nevada agency in damages claim.

• Author: Beavers, James A.

The Supreme Court affirmed the Nevada Supreme Court's holding that Nevada courts had jurisdiction over a California state agency. However, the Court further held that a Nevada court could not apply Nevada law to award damages against California greater than it could award against Nevada in similar circumstances.

Background

Gilbert Hyatt moved from California to Nevada in the early 1990s. He claimed he sold his house in California and rented an apartment, registered to vote, and opened a bank account in Nevada in September 1991. Thus, he claimed Nevada as his place of residence on his 1991 and 1992 tax returns. Nevada has no state income tax, and California has an income tax with high rates, so Hyatt, who was receiving large amounts of income from licensing patents he owned (including a patent on single-chip integrated computer circuit architecture that is integral to microprocessors), saved millions of dollars of tax as a Nevada resident.

California's Franchise Tax Board, however, believed that Hyatt had not moved to Nevada until 1992, and it initiated an investigation and tax audit of Hyatt. During this audit, the board's employees allegedly did not behave well. According to Hyatt, among other things, they traveled to Nevada and allegedly peered through his windows, rummaged around in his garbage, contacted his estranged family members, and shared his personal information not only with newspapers but also with his business contacts and even his place of worship. As a result of the audit, the board determined that Hyatt was a resident of California for 1991 and part of 1992, and that he accordingly owed over $10 million in unpaid state income taxes, penalties, and interest.

In 1998, Hyatt filed suit against the board in Nevada state court. In that suit, he alleged that the board committed a variety of torts, including fraud, intentional infliction of emotional distress, and invasion of privacy. California claimed that under California law the board was immune from suit and that Nevada was required to enforce California's immunity law. The Nevada Supreme Court found that Nevada's immunity law, under which a state agency has immunity for negligent but not intentional torts, applied. The board appealed this decision to the U.S. Supreme Court, which held that Nevada was not prohibited from applying its own immunity law in the case.

The case was remanded for trial, and a jury awarded Hyatt almost $400 million in compensatory and punitive...