High court tie lets states face lawsuits in other states

AP News
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Posted: Apr 19, 2016 12:09 PM

WASHINGTON (AP) — A tie vote from the Supreme Court means California officials can be hauled into a Nevada state court to face allegations in a long-running tax dispute with a Nevada inventor.

But on a separate issue in the case, the justices ruled 6-2 that Nevada can't award damages greater than what California or Nevada law would allow. The court threw out a $1 million judgment awarded to Gilbert Hyatt over allegations that California's tax agency invaded his privacy and committed fraud.

It was the third time the court has deadlocked 4-4 since the death of Justice Antonin Scalia.

Hyatt is a former California resident who claims he moved to Las Vegas in 1991, just before collecting $40 million in patent fees for developing a computer microprocessor chip.

California officials say he only moved out of the state in 1992. They claim he is on the hook for millions in back taxes.

But Hyatt sued the agency claiming its officials were overzealous while pursuing him. He won a $500 million judgment that was later reduced to $1 million.

California officials had asked the justices to overturn a 1979 case that said one state can open the doors of its courts to a private citizen's lawsuit against another state. Lawyers representing the state argued that such lawsuits violate the sovereign protections of states.

Writing for the high court, Justice Stephen Breyer said the court was divided on the issue, leaving the current law intact.

But Breyer said Nevada courts could not allow greater damages than what California or Nevada would ordinarily permit in such cases. California law would allow no damages in such lawsuits, while Nevada law limits damages to $50,000.

Breyer said the Nevada court allowed damages to exceed $50,000 in this case under "a special and discriminatory legal rule that would apply only to sister states." The court said that was unconstitutional.

The case now returns to lower courts to be resolved.

Hyatt had accused the tax agency of outrageous behavior by sending officials to peer through his windows, contact estranged family members and sharing his personal information with business contacts.

It was the second time the dispute has ended up before the Supreme Court. The justices ruled in 2003 that the Franchise Tax Board was not immune from a lawsuit in Nevada courts even though California law would prevent the agency from being sued in California.

Chief Justice John Roberts dissented, saying the Constitution does not block a state from applying its own law to address an injury within its own borders. He was joined by Justice Clarence Thomas.