Argument preview: Immunity, precedent and federalism in Franchise Tax Board of California v. Hyatt
Franchise Tax Board of California v. Hyatt is the federal courts case that keeps on giving. It is a SCOTUS “threepeater,” having now reached the justices on three separate occasions. It raises a rich sovereign immunity issue — namely, whether states should enjoy immunity in one another’s courts. And it also asks the Supreme Court to overrule a precedent, Nevada v. Hall, that at least four justices were recently prepared to throw overboard. Whether new Justices Neil Gorsuch and Brett Kavanaugh follow that path will provide valuable insight into their emerging jurisprudence on federalism and stare decisis.
The case arises from allegations that Gilbert Hyatt evaded California taxes by falsely claiming to have moved to Nevada. After the Franchise Tax Board of California concluded that Hyatt owed millions in unpaid taxes, Hyatt, a citizen of Nevada, sued the board in Nevada court, alleging fraud and other torts. That litigation began in 1998. Eventually, Hyatt won a trial judgment of almost half a billion dollars — though a complex series of appeals, including two trips to the U.S. Supreme Court, have reduced the figure to about $100,000 plus the possibility of costs.
Back in 2016, when the justices last ruled in this case, there were two questions presented. One was whether to overrule Hall, which held that states generally lack sovereign immunity in one another’s courts. The court seemed prepared to overrule Hall by a 5-4 vote, but Justice Antonin Scalia passed away, leaving the court deadlocked on that issue. The remaining eight justices issued a ruling based on the other question presented. That unplanned sequence of events notified Hall’s defenders that they had one last chance to defend the rule against interstate sovereign immunity.
A few thematic questions run through the various arguments.
First, what is the legal source of state sovereign immunity? The board describes a principle emanating from the Constitution’s federal structure, whereas Hyatt asserts an 18th-century common law doctrine that is partially protected but unchanged by the Constitution. While very different, those answers both focus on the nation’s early history. But the court’s case law in this area suggests an answer closer to the present-day: Whatever its origins, state sovereign immunity has become a dynamic doctrine propelled ever further by judicial perceptions of what would make for a sensible as opposed to “anomalous” rule. In this case, the doctrine may take another step toward “the limit of its logic.”
The board may be right that Hall has become a doctrinal outlier and that it has inspired limited reliance, particularly since the court has recently signaled interest in overruling it. In addition, the court has sometimes afforded limited weight to precedents that deny constitutional rights to individuals, and perhaps rulings that deny sovereign immunity to states — essentially, rights for states — could be viewed similarly. But Hyatt plausibly responds that the board’s case for overruling lacks any showing of unworkability or changed circumstances and so largely boils down to the view that Hall was wrong. And although the court’s decision to grant review could signal an appetite to overrule, the justices recently gave a cold reception to a criminal defendant who opposed a precedent that limited his double jeopardy rights.
Though this case is not a blockbuster, Justice Anthony Kennedy’s absence will be felt. Almost 20 years ago, Kennedy authored the court’s controversial opinion in Alden v. Maine, which was at pains to distinguish and preserve Hall on grounds akin to the ones that Hyatt now advances. A few years ago, however, Kennedy was presumably one of the four justices who voted to overrule Hall when this case last reached the court — an apparent product of his influential focus on the “dignity” of states. Now that Kennedy has retired, it will be interesting to see whether his former clerks, Gorsuch and Kavanaugh, approach these issues in a similar spirit.
Richard M. Re, Argument preview: Immunity, precedent and federalism in Franchise Tax Board of California v. Hyatt, SCOTUSblog (Jan. 3, 2019, 1:32 PM), http://www.scotusblog.com/2019/01/argument-preview-immunity-precedent-and-federalism-in-franchise-tax-board-of-california-v-hyatt/