Franchise Tax Board v. Hyatt

Nevada correctly allowed its citizen to sue California’s Franchise Tax Board in Nevada state court, since it need not apply California law immunizing the Franchise Tax Board from such suits; but it was wrong to allow its citizen to collect more than $50,000 in damages from California’s agency, when Nevada law prohibits damage awards in that amount against Nevada’s own agencies.  The United States Supreme Court affirms on a 4-4 split on the issue of whether a citizen of state 1 may sue state 2 in state 1’s courts.  But it also holds that state 1 may not apply as against state 2, in such a suit, a rule of law that evinces hostility to the public acts, including statutes, of state 2.  Here, Nevada allowed its citizen to sue California’s Franchise Tax Board in Nevada state court.  That much is allowed.  And Nevada need not apply California law immunizing the Franchise Tax Board to such suits.  But Nevada went too far in holding that its citizen could collect more than $50,000 in damages from California’s agency when Nevada law prohibits damage awards in that amount against Nevada’s agencies.  Nevada can choose to apply either its own law or California’s but it cannot craft a special, less favorable rule for suits by its citizens against other states.

United States Supreme Court (Breyer, J.; Alito, J., concurring in the judgment; Roberts, C.J., & Thomas, J., dissenting); April 19, 2016; 2016 WL 1562480

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