The decision today in a residency tax audit case, on its third trip to the U.S. Supreme Court, shows how the Court is ready to overturn prior cases. Justice Stephen Breyer put it succinctly in his dissent: “Today’s decision can only cause one to wonder which cases the Court will overrule next.”
In Franchise Tax Board of California v. Hyatt the Court ruled that the Constitution does not permit a state to be sued by a private party without its consent in the courts of a different state, overruling the Court’s 1979 decision to the contrary in Nevada v. Hall.
“This case shows that precedent gets little weight with the conservative justices on the Roberts’ Court; Justice Breyer expresses this well in his dissent,” says Erwin Chermerinsky, dean of University of California, Berkeley, School of Law, who argued the case on behalf of Hyatt in January. After the oral arguments, Chermerinsky wrote that his sense was that the discussion was really about “how the court is going to treat precedent when issues like abortion, affirmative action, and gay and lesbian rights return to the court.” In other words, will Roe v. Wade be next?
The FTB case concerned Gilbert Hyatt, who moved from California to Nevada after earning big royalties on a technology patent. The California Franchise Tax Board pursued him, picking through his trash and contacting more than 100 third parties to try to prove that his move to Nevada was a sham to avoid $10 million-plus in state income taxes. Hyatt’s protest of that tax bill is still pending before the California Office of Tax Appeals.
Separately, Hyatt sued the FTB in Nevada state court for the torts he alleged the agency committed during the audit. California sought to have the case dismissed under its laws granting immunity to state officials. The U.S. Supreme Court in 2003 reviewed the case and allowed Hyatt to continue his lawsuit. That led to the second trip to the U.S. Supreme Court in 2016, leaving intact the idea that state courts can hear lawsuits over the behavior of officials from other states but limiting what a state could award to out-of-staters (Hyatt’s potential reward was limited to $100,000 per Nevada law, Chermerinsky says).