Franchise Tax Bd. of Cal. v. Hyatt
Franchise Tax Bd. of Cal. v. Hyatt
Opinion
*1490
This case, now before us for the third time, requires us to decide whether the Constitution permits a State to be sued by a private party without its consent in the courts of a different State. We hold that it does not and overrule our decision to the contrary in
Nevada v. Hall
,
I
In the early 1990s, respondent Gilbert Hyatt earned substantial income from a technology patent for a computer formed on a single integrated circuit chip. Although Hyatt's claim was later canceled, see
Hyatt v. Boone
,
Petitioner Franchise Tax Board of California (Board), the state agency responsible for assessing personal income tax, suspected that Hyatt's move was a sham. Thus, in 1993, the Board launched an audit *1491 to determine whether Hyatt underpaid his 1991 and 1992 state income taxes by misrepresenting his residency. In the course of the audit, employees of the Board traveled to Nevada to conduct interviews with Hyatt's estranged family members and shared his personal information with business contacts. In total, the Board sent more than 100 letters and demands for information to third parties. The Board ultimately concluded that Hyatt had not moved to Nevada until April 1992 and owed California more than $ 10 million in back taxes, interest, and penalties. Hyatt protested the audit before the Board, which upheld the audit after an 11-year administrative proceeding. The appeal of that decision remains pending before the California Office of Tax Appeals.
In 1998, Hyatt sued the Board in Nevada state court for torts he alleged the agency committed during the audit. After the trial court denied in part the Board's motion for summary judgment, the Board petitioned the Nevada Supreme Court for a writ of mandamus ordering dismissal on the ground that the State of California was immune from suit. The Board argued that, under the Full Faith and Credit Clause, Nevada courts must apply California's statute immunizing the Board from liability for all injuries caused by its tax collection. See U.S. Const., Art. IV, § 1 ; Cal. Govt. Code Ann. § 860.2 (West 1995). The Nevada Supreme Court rejected that argument and held that, under general principles of comity, the Board was entitled to the same immunity that Nevada law afforded Nevada agencies-that is, immunity for negligent but not intentional torts. We granted certiorari and unanimously affirmed, holding that the Full Faith and Credit Clause did not prohibit Nevada from applying its own immunity law to the case.
Franchise Tax Bd. of Cal. v. Hyatt
,
On remand, the trial court conducted a 4-month jury trial that culminated in a verdict for Hyatt that, with prejudgment interest and costs, exceeded $ 490 million. On appeal, the Nevada Supreme Court rejected most of the damages awarded by the lower court, upholding only a $ 1 million judgment on one of Hyatt's claims and remanding for a new damages trial on another. Although the court recognized that tort liability for Nevada state agencies was capped at $ 50,000 under state law, it nonetheless held that Nevada public policy precluded it from applying that limitation to the California agency in this case. We again granted certiorari and this time reversed, holding that the Full Faith and Credit Clause required Nevada courts to grant the Board the same immunity that Nevada agencies enjoy.
Franchise Tax Bd. of Cal.v.Hyatt,
578 U.S. ----, ---- - ----,
We granted, for a third time, the Board's petition for certiorari, 585 U.S. ----,
*1492 II
Nevadav.Hall is contrary to our constitutional design and the understanding of sovereign immunity shared by the States that ratified the Constitution. Stare decisis does not compel continued adherence to this erroneous precedent. We therefore overrule Hall and hold that States retain their sovereign immunity from private suits brought in the courts of other States.
A
Hall
held that the Constitution does not bar private suits against a State in the courts of another State.
The
Hall
majority was unpersuaded that the Constitution implicitly altered the relationship between the States. In the Court's view, the ratification debates, the Eleventh Amendment, and our sovereign-immunity precedents did not bear on the question because they "concerned questions of federal-court jurisdiction."
Chief Justice Burger, Justice Blackmun, and Justice Rehnquist dissented.
B
Hall
's determination that the Constitution does not contemplate sovereign immunity for each State in a sister State's courts misreads the historical record and misapprehends the "implicit ordering of relationships within the federal system necessary to make the Constitution a workable governing charter and to give each provision within that document the full effect intended by the Framers."
1
After independence, the States considered themselves fully sovereign nations. As the Colonies proclaimed in 1776, they were "Free and Independent States" with "full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do." Declaration of Independence ¶4. Under international law, then, independence "entitled" the Colonies "to all the rights and powers of sovereign states."
McIlvaine v. Coxe's Lessee
,
"An integral component" of the States' sovereignty was "their immunity from private suits."
Federal Maritime Comm'n v. South Carolina Ports Authority
,
"It is inherent in the nature of sovereignty not to be amenable to the suit of an individual without its consent. This is the general sense and the general practice of mankind; and the exemption, as one of the attributes of sovereignty, is now enjoyed by the government of every State in the Union." The Federalist No. 81, at 487 (emphasis deleted).
The Founders believed that both "common law sovereign immunity" and "law-of-nations sovereign immunity" prevented States from being amenable to process in any court without their consent. See Pfander, Rethinking the Supreme Court's Original Jurisdiction in State-Party Cases,
The founding generation thus took as given that States could not be haled involuntarily before each other's courts. See Woolhandler, Interstate Sovereign Immunity, 2006 S. Ct. Rev. 249, 254-259. This understanding is perhaps best illustrated by preratification examples. In 1781, a creditor named Simon Nathan tried to recover a debt that Virginia allegedly owed him by attaching some of its property in Philadelphia. James Madison and other Virginia delegates to the Confederation Congress responded by sending a communique to Pennsylvania requesting that its executive branch have the action dismissed. See Letter from Virginia Delegates to Supreme Executive Council of Pennsylvania (July 9, 1781), in 3 The Papers of James Madison, 184-185 (W. Hutchinson & W. Rachal eds. 1963). As Madison framed it, the Commonwealth's property could not be attached by process issuing from a court of "any other State in the Union."
Id.,
at 184. To permit otherwise would require Virginia to "abandon its Sovereignty by descending to answer before the Tribunal of another Power."
Ibid.
Pennsylvania Attorney General William Bradford intervened, urging the Court of Common Pleas to dismiss the action. See
Nathan v. Virginia
,
Similarly, a Pennsylvania Admiralty Court that very same year dismissed a libel action against a South Carolina warship, brought by its crew to recover unpaid wages. The court reasoned that the vessel was owned by a "sovereign independent state."
Moitez v. The South Carolina
,
The Founders were well aware of the international-law immunity principles behind these cases. Federalists and Antifederalists alike agreed in their preratification debates that States could not be sued in the courts of other States. One Federalist, who argued that Article III would waive the States' immunity in federal court, admitted that the waiver was desirable because of the "impossibility of calling a sovereign state before the jurisdiction of another sovereign state." 3 Debates on the Constitution 549 (J. Elliot ed. 1876) (Pendleton) (Elliot's Debates). Two of the most prominent Antifederalists-Federal Farmer and Brutus-disagreed with the Federalists about the desirability of a federal forum in which States could be sued, but did so for the very reason that the States had previously been "subject to no such actions" in any court and were not "oblige[d]" "to answer to an individual in a court of law." Federal Farmer No. 3 (Oct. 10, 1787), in 4 The Founders' Constitution 227 (P. Kurland & R. Lerner eds. 1987). They found it "humiliating and degrading" that a State might have to answer "the suit of an individual." Brutus No. 13 (Feb. 21, 1788), in id., at 238.
In short, at the time of the founding, it was well settled that States were immune under both the common law and the law of nations. The Constitution's use of the term "States" reflects both of these kinds of traditional immunity. And the States retained these aspects of sovereignty,
*1495
"except as altered by the plan of the Convention or certain constitutional Amendments."
Alden
,
2
One constitutional provision that abrogated certain aspects of this traditional immunity was Article III, which provided a neutral federal forum in which the States agreed to be amenable to suits brought by other States. Art. III, § 2; see
Alden
,
supra
, at 755,
The States, in ratifying the Constitution, similarly surrendered a portion of their immunity by consenting to suits brought against them by the United States in federal courts. See
Monaco
,
supra,
at 328,
The Antifederalists worried that Article III went even further by extending the federal judicial power over controversies "between a State and Citizens of another State." They suggested that this provision implicitly waived the States' sovereign immunity against
private
suits in federal courts. But "[t]he leading advocates of the Constitution assured the people in no uncertain terms" that this reading was incorrect.
Alden
,
"[A federal court's] jurisdiction in controversies between a state and citizens of another state is much objected to, and perhaps without reason. It is not in the power of individuals to call any state into court. The only operation it can have, is that, if a state should wish to bring a suit against a citizen, it must be brought before the federal court. This will give satisfaction to individuals, as it will prevent citizens, on whom a state may have a claim, being dissatisfied with the state courts." Elliot's Debates 533.
John Marshall echoed these sentiments:
"With respect to disputes between a state and the citizens of another state , its jurisdiction has been decried with unusual vehemence. I hope no gentleman will think that a state will be called at the bar of the federal court.... The intent is, to enable states to recover claims of individuals residing in other states. I contend this construction is warranted by the words." Id., at 555 (emphasis in original).
Not long after the founding, however, the Antifederalists' fears were realized. In
Chisholm v. Georgia
,
The Eleventh Amendment confirmed that the Constitution was not meant to "rais[e] up" any suits against the States that were "anomalous and unheard of when the Constitution was adopted."
Hans v. Louisiana
,
Consistent with this understanding of state sovereign immunity, this Court has held that the Constitution bars suits against nonconsenting States in a wide range of cases. See,
e.g.,
Federal Maritime Comm'n
,
supra
(actions by private parties before federal administrative agencies);
Alden
,
supra
(suits by private parties against a State in its own courts);
Blatchford v. Native Village of Noatak
,
3
Despite this historical evidence that interstate sovereign immunity is preserved in the constitutional design, Hyatt insists that such immunity exists only as a "matter of comity" and can be disregarded by the forum State.
Hall
,
supra,
at 416,
The problem with Hyatt's argument is that the Constitution affirmatively altered the relationships between the States, so that they no longer relate to each other solely as foreign sovereigns. Each State's equal dignity and sovereignty under the Constitution implies certain constitutional "limitation[s] on the sovereignty of all of its sister States."
World-Wide Volkswagen Corp. v. Woodson
,
To begin, Article I divests the States of the traditional diplomatic and military tools that foreign sovereigns possess. Specifically, the States can no longer prevent or remedy departures from customary international law because the Constitution deprives them of the independent power to lay imposts or duties on imports and exports, to enter into treaties or compacts, and to wage war. Compare Art. I, § 10, with Declaration of Independence ¶4 (asserting the power to "levy War, conclude Peace, contract Alliances, [and] establish Commerce"); see
Kansas v. Colorado
,
Article IV also imposes duties on the States not required by international law. The Court's Full Faith and Credit Clause precedents, for example, demand that state-court judgments be accorded full effect in other States and preclude States from "adopt[ing] any policy of hostility to the public Acts" of other States.
Hyatt II
, 578 U.S., at ----,
The Constitution also reflects implicit alterations to the States' relationships with each other, confirming that they are no longer fully independent nations. See
New Hampshire v. Louisiana
,
Interstate sovereign immunity is similarly integral to the structure of the Constitution. Like a dispute over borders or water rights, a State's assertion of compulsory judicial process over another State involves a direct conflict between sovereigns. The Constitution implicitly strips States of any power they once had to refuse each other sovereign immunity, just as it denies them the power to resolve border disputes by political means. Interstate immunity, in other words, is "implied as an essential component of federalism."
Hall
,
Hyatt argues that we should find no right to sovereign immunity in another State's courts because no constitutional provision explicitly grants that immunity. But this is precisely the type of "ahistorical literalism" that we have rejected when "interpreting the scope of the States' sovereign immunity since the discredited decision in
Chisholm
."
Alden
,
Moreover, Hyatt's ahistorical literalism proves too much. There are many other constitutional doctrines that are not spelled out in the Constitution but are nevertheless implicit in its structure and supported by historical practice-including, for example, judicial review,
Marbury v. Madison
,
C
With the historical record and precedent against him, Hyatt defends
Hall
on the basis of
stare decisis
. But
stare decisis
is " 'not an inexorable command,' "
Pearson v. Callahan
,
The first three factors support our decision to overrule Hall . We have already explained that Hall failed to account for the historical understanding of state sovereign immunity and that it failed to consider how the deprivation of traditional diplomatic tools reordered the States' relationships with one another. We have also demonstrated that Hall stands as an outlier in our sovereign-immunity jurisprudence, particularly when compared to more recent decisions.
As to the fourth factor, we acknowledge that some plaintiffs, such as Hyatt, have relied on Hall by suing sovereign States. Because of our decision to overrule Hall , Hyatt unfortunately will suffer the loss of two decades of litigation expenses and a final judgment against the Board for its egregious conduct. But in virtually every case that overrules a controlling precedent, the party relying on that precedent will incur the loss of litigation expenses and a favorable decision below. Those case-specific costs are not among the reliance interests that would persuade us to adhere to an incorrect resolution of an important constitutional question.
* * *
Nevada v.Hall is irreconcilable with our constitutional structure and with the historical evidence showing a widespread preratification understanding that States retained immunity from private suits, both in their own courts and in other courts. We therefore overrule that decision. Because the Board is thus immune from Hyatt's suit in Nevada's courts, the judgment of the Nevada Supreme Court is reversed, and the case is remanded for proceedings not inconsistent with this opinion.
It is so ordered.
Justice BREYER, with whom Justice GINSBURG, Justice SOTOMAYOR, and Justice KAGAN join, dissenting.
Can a private citizen sue one State in the courts of another? Normally the answer to this question is no, because the State where the suit is brought will choose to grant its sister States immunity. But the question here is whether the Federal *1500 Constitution requires each State to grant its sister States immunity, or whether the Constitution instead permits a State to grant or deny its sister States immunity as it chooses.
We answered that question 40 years ago in
Nevada v. Hall
,
I
Hall involved a suit brought by a California resident against the State of Nevada in the California courts. We rejected the claim that the Constitution entitled Nevada to absolute immunity. We first considered the immunity that States possessed as independent sovereigns before the Constitution was ratified. And we then asked whether ratification of the Constitution altered the principles of state sovereign immunity in any relevant respect. At both steps, we concluded, the relevant history and precedent refuted the claim that States are entitled to absolute immunity in each other's courts.
A
Hall first considered the immunity that States possessed before ratification. "States considered themselves fully sovereign nations" during this period, ante , at 1493, and the Court in Hall therefore asked whether sovereign nations would have enjoyed absolute immunity in each other's courts at the time of our founding.
The answer was no. At the time of the founding, nations granted other nations sovereign immunity in their courts not as a matter of legal obligation but as a matter of choice,
i.e.
, of comity or grace or consent. Foreign sovereign immunity was a doctrine "of implied consent by the territorial sovereign ... deriving from standards of public morality, fair dealing, reciprocal self-interest, and respect."
National City Bank of N. Y. v. Republic of China
,
This Court took that view of foreign sovereign immunity in two founding-era decisions that forecast the result in
Hall
. In
Schooner Exchange v. McFaddon
,
The Court ultimately held in
Schooner Exchange
that the United States had consented implicitly to give immunity to the French warship. See
Ten years later, in
The Santissima Trinidad
,
The Court in
Hall
relied on this reasoning. See
B
The Court in
Hall
next held that ratification of the Constitution did not alter principles of state sovereign immunity in any relevant respect. The Court concluded that express provisions of the Constitution-such as the Eleventh Amendment and the Full Faith and Credit Clause of Article IV-did not require States to accord each other sovereign immunity. See
To the contrary, the Court in
Hall
observed that an express provision of the Constitution undermined the assertion that States were absolutely immune in each other's courts. Unlike suits brought against a State in the State's own courts,
Hall
noted, a suit against a State in the courts of a different State "necessarily implicates the power and authority of" both States.
To illustrate that principle,
Hall
cited
Georgia v. Chattanooga
,
Similar reasoning applied in
Hall
. Mandating absolute interstate immunity "by inference from the structure of our Constitution and nothing else" would "intru[de] on the sovereignty of the States-and the power of the people-in our Union."
II
The majority disputes both Hall 's historical conclusion regarding state immunity before ratification and its conclusion that the Constitution did not alter that immunity. But I do not find the majority's arguments convincing.
A
The majority asserts that before ratification "it was well settled that States were immune under both the common law and the law of nations." Ante , at 1494. The majority thus maintains that States were exempt from suit in each other's courts.
But the question in Hall concerned the basis for that exemption. Did one sovereign have an absolute right to an exemption from the jurisdiction of the courts of another, or was that exemption a customary matter, a matter of consent that a sovereign might withdraw? As to that question, nothing in the majority's opinion casts doubt on Hall 's conclusion that States-like foreign nations-were accorded immunity as a matter of consent rather than absolute right.
The majority refers to "the founding era's foremost expert on the law of nations," Emer de Vattel, who stated that a "sovereign is 'exempt from all foreign jurisdiction.' "
Ante
, at 1493 (quoting 4 E. de Vattel, The Law of Nations 486 (J. Chitty ed. 1883) (Vattel); alterations omitted). But Vattel made clear that the source of a sovereign's immunity in a foreign sovereign's courts is the " 'consen[t]' " of the foreign sovereign, which, he added, reflects a " 'tacit convention' " among nations.
Schooner Exchange
,
The majority also draws on statements of the Founders concerning the importance of sovereign immunity generally. But, as
Hall
noted, those statements concerned matters entirely distinct from the question of state immunity at issue here. Those statements instead "concerned questions of
federal
-
court
jurisdiction and the extent to which the States, by ratifying the Constitution and creating federal courts, had authorized suits against themselves in those courts."
The majority cites
Nathan v. Virginia
,
B
The majority next argues that "the Constitution affirmatively altered the relationships between the States" by giving them immunity that they did not possess when they were fully independent. Ante , at 1497. The majority thus maintains that, whatever the nature of state immunity before ratification, the Constitution accorded States an absolute immunity that they did not previously possess.
The most obvious problem with this argument is that no provision of the Constitution gives States absolute immunity in each other's courts. The majority does not attempt to situate its newfound constitutional immunity in any provision of the Constitution itself. Instead, the majority maintains that a State's immunity in other States' courts is "implicit" in the Constitution,
ante
, at 1498 - 1499, "embed[ded] ... within the constitutional design,"
ante
, at 1496 - 1497, and reflected in " 'the plan of the Convention,' "
ante
, at 1494 - 1495. See also
Hall
,
I agree with today's majority and the dissenters in
Hall
that the Constitution contains implicit guarantees as well as explicit ones. But, as I have previously noted, concepts like the "constitutional design" and "plan of the Convention" are "highly abstract, making them difficult to apply"-at least absent support in "considerations of history, of constitutional purpose, or of related consequence."
Federal Maritime Comm'n v. South Carolina Ports Authority
,
At any rate, I can find nothing in the "plan of the Convention" or elsewhere to suggest that the Constitution converted what had been the customary practice of extending immunity by consent into an absolute federal requirement that no State could withdraw. None of the majority's *1504 arguments indicates that the Constitution accomplished any such transformation.
The majority argues that the Constitution sought to preserve States' "equal dignity and sovereignty." Ante , at 1497. That is true, but tells us nothing useful here. When a citizen brings suit against one State in the courts of another, both States have strong sovereignty-based interests. In contrast to a State's power to assert sovereign immunity in its own courts, sovereignty interests here lie on both sides of the constitutional equation.
The majority also says-also correctly-that the Constitution demanded that States give up certain sovereign rights that they would have retained had they remained independent nations. From there the majority infers that the Constitution must have implicitly given States immunity in each other's courts to provide protection that they gave up when they entered the Federal Union.
But where the Constitution alters the authority of States vis-à-vis other States, it tends to do so explicitly. The Import-Export Clause cited by the majority, for example, creates "harmony among the States" by preventing them from "burden[ing] commerce ... among themselves."
Michelin Tire Corp. v. Wages
,
Nor does there seem to be any need to create implicit constitutional protections for States. As the history of this case shows, the Constitution's express provisions seem adequate to prohibit one State from treating its sister States unfairly-even if the State permits suits against its sister States in its courts. See
The majority may believe that the distinction between permissive and absolute immunity was too nuanced for the Framers. The Framers might have understood that most nations did in fact allow other nations to assert sovereign immunity in their courts. And they might have stopped there, ignoring the fact that, under international law, a nation had the sovereign power to change its mind.
But there is simply nothing in the Constitution or its history to suggest that anyone reasoned in that way. No constitutional language supports that view. Chief Justice Marshall, Justice Story, and the Court itself took a somewhat contrary view without mentioning the matter. And there is no strong reason for treating States differently than foreign nations in this context. Why would the Framers, silently and without any evident reason, have transformed sovereign immunity from a permissive immunity predicated on comity and consent into an absolute immunity that States must accord one another? The Court in Hall could identify no such reason. Nor can I.
III
In any event,
stare decisis
requires us to follow
Hall
, not overrule it. See
Planned Parenthood of Southeastern Pa. v. Casey
,
The majority believes that
Hall
was wrongly decided. But "an argument that we got something wrong-even a good argument to that effect-cannot by itself justify scrapping settled precedent."
Kimble
, 576 U.S., at ----,
The law has not changed significantly since this Court decided
Hall
, and has not left
Hall
a relic of an abandoned doctrine. To the contrary,
Hall
relied on this Court's precedent in reaching its conclusion, and this Court's subsequent cases are consistent with
Hall
. As noted earlier,
Hall
drew its historical analysis from earlier decisions such as
Schooner Exchange,
written by Chief Justice Marshall. And our post-
Hall
decisions regarding the immunity of foreign nations are consistent with those earlier decisions. The Court has recently reaffirmed "Chief Justice Marshall's observation that foreign sovereign immunity is a matter of grace and comity rather than a constitutional requirement."
Republic of Austria v. Altmann
,
Nor has our understanding of state sovereign immunity evolved to undermine
Hall
. The Court has decided several state sovereign immunity cases since
Hall,
but these cases have all involved a State's immunity in a federal forum or in the State's own courts. Compare
Federal Maritime Comm'n
,
The dissenters in
Hall
feared its "practical implications."
The
Hall
issue so rarely arises because most States, like most sovereign nations, are reluctant to deny a sister State the immunity that they would prefer to enjoy reciprocally. Thus, even in the absence of constitutionally mandated immunity, States normally grant sovereign immunity voluntarily. States that fear that this practice will be insufficiently protective are free to enter into an interstate compact to guarantee that the normal practice of granting immunity will continue. See
Cuyler v. Adams
,
Although many States have filed an
amicus
brief in this case asking us to overturn
Hall,
I can find nothing in the brief that indicates that reaffirming
Hall
would affront "the dignity and respect due sovereign entities."
Federal Maritime Comm'n
,
Perhaps the majority believes that there has been insufficient reliance on Hall to justify preserving it. But any such belief would ignore an important feature of reliance. The people of this Nation rely upon stability in the law. Legal stability allows lawyers to give clients sound advice and allows ordinary citizens to plan their lives. Each time the Court overrules a case, the Court produces increased uncertainty. To overrule a sound decision like Hall is to encourage litigants to seek to overrule other cases; it is to make it more difficult for lawyers to refrain from challenging settled law; and it is to cause the public to become increasingly uncertain about which cases the Court will overrule and which cases are here to stay.
I understand that judges, including Justices of this Court, may decide cases wrongly. I also understand that later-appointed judges may come to believe that earlier-appointed judges made just such an error. And I understand that, because opportunities to correct old errors are rare, judges may be tempted to seize every opportunity to overrule cases they believe to have been wrongly decided. But the law can retain the necessary stability only if this Court resists that temptation, overruling prior precedent only when the circumstances demand it.
* * *
It is one thing to overrule a case when it "def[ies] practical workability," when "related principles of law have so far developed as to have left the old rule no more than a remnant of abandoned doctrine," or when "facts have so changed, or come to be seen so differently, as to have robbed the old rule of significant application or justification."
Casey
,
Hyatt argues that the law-of-the-case doctrine precludes our review of this question, but he failed to raise that nonjurisdictional issue in his brief in opposition. We therefore deem this argument waived. See this Court's Rule 15.2;
Arizona v. California
,
The Eleventh Amendment provides: "The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State."
Reference
- Full Case Name
- FRANCHISE TAX BOARD OF CALIFORNIA, Petitioner v. Gilbert P. HYATT
- Cited By
- 152 cases
- Status
- Published