Franchise Tax Board of California v. Hyatt (Hyatt III)
Does the Constitution bar lawsuits against a state in the courts of another state without its consent — that is, do states enjoy sovereign immunity from suit in each other's courts?
The Decision
5-4 decision · Opinion by Clarence Thomas · 2019
Majority Opinion— Clarence Thomasconcurring ↓dissent ↓
In a 5–4 decision authored by Justice Clarence Thomas, the Supreme Court ruled in favor of the Franchise Tax Board of California and overruled its 1979 precedent in Nevada v. Hall. The Court held that the Constitution does not permit a state to be sued in the courts of another state without its consent. This meant that Hyatt's long-running tort lawsuit against California's tax agency in Nevada's courts had to be dismissed.
The majority reasoned that sovereign immunity between states is deeply embedded in the constitutional structure, even though no single provision of the Constitution explicitly says so. Justice Thomas pointed to the historical understanding at the time of the founding: the states entered the Union as sovereign entities, and they would not have agreed to a constitutional system that allowed them to be hauled before each other's courts. He compared this to the Eleventh Amendment, which the Court has long interpreted as confirming a broader principle of sovereign immunity — not just the narrow text about federal court suits by citizens of other states. The majority found that the same structural logic applies to suits in sister-state courts.
The Court also addressed the question of stare decisis — the principle that courts should generally follow their own prior rulings. The majority acknowledged that overruling precedent is a serious step, but concluded that Nevada v. Hall was 'badly reasoned' from the beginning. Justice Thomas noted that the Hall decision was inconsistent with the broader framework of constitutional sovereign immunity the Court had developed in other contexts, and that it had proven difficult to apply in practice. The majority argued that adherence to an erroneous precedent is not a virtue when the precedent conflicts with the Constitution's structural design.
The practical effect of the ruling was dramatic for this particular case: after nearly three decades of litigation, Hyatt's massive damages award was wiped out. More broadly, the decision established a firm constitutional rule that states cannot be sued in each other's courts, giving states a shield that many had long sought.
Concurring Opinions
Justice Thomas's majority opinion itself addressed stare decisis at length, essentially functioning as both the holding and a defense of overruling precedent; no separate concurring opinions were filed.
Dissenting Opinions
Stephen Breyerjoined by Ruth Bader Ginsburg, Sonia Sotomayor, Elena Kagan
Justice Breyer argued that Nevada v. Hall was correctly decided and that the majority had no good justification for overruling a 40-year-old precedent. He contended that nothing in the Constitution's text grants states immunity from suit in each other's courts, and that the majority's willingness to discard settled law threatened the Court's institutional legitimacy and the stability of the rule of law.
- The Constitution's text only addresses sovereign immunity in the context of federal courts (the Eleventh Amendment), and the framers' silence about state-court immunity suggests they did not intend to provide it.
- Stare decisis is not merely a policy preference but a foundational pillar of the legal system, and the majority failed to identify any special justification — such as changed circumstances or proven unworkability — for overruling a decades-old precedent.
- The majority's reasoning could destabilize other areas of law by signaling that longstanding precedents may be overruled simply because a new majority of justices disagrees with the original decision.
- The dissent warned that the decision would leave individuals like Hyatt with no remedy when a state agency commits torts against an out-of-state citizen, since the offending state is unlikely to consent to being sued in its own courts.
Background & Facts
Gilbert Hyatt was a prolific inventor who earned substantial income from his patents, including one related to computer technology. In 1991, Hyatt claimed he had moved from California to Nevada — a state with no personal income tax. California's Franchise Tax Board (FTB), the agency responsible for collecting state taxes, believed the move was a sham designed to avoid paying California income taxes on millions of dollars of patent royalties. The FTB launched an audit that would drag on for years and, according to Hyatt, become extraordinarily aggressive and invasive — allegedly including rifling through his private trash, contacting his neighbors and business associates, and making false representations during the investigation.
Hyatt responded by suing the FTB in Nevada state court, claiming the agency had committed various torts (legal wrongs like fraud and invasion of privacy) during its audit. The FTB argued it could not be hauled into the courts of another state at all, invoking the doctrine of sovereign immunity — the ancient principle that a sovereign government cannot be sued without its own permission. However, a 1979 Supreme Court decision called Nevada v. Hall had ruled that the Constitution does not prevent one state from being sued in the courts of another state.
This long-running dispute reached the U.S. Supreme Court not once but three times. In 2003, the Court ruled that Nevada courts could hear the suit under the existing precedent of Nevada v. Hall. The case went back to the Nevada courts, where a jury awarded Hyatt nearly $500 million in damages. On appeal, the case returned to the Supreme Court in 2016, but with only eight justices sitting after the death of Justice Scalia, the Court split 4–4 and could not resolve the sovereign immunity question.
The FTB petitioned the Court a third time, directly asking the justices to overrule Nevada v. Hall and hold that states are constitutionally immune from being sued in each other's courts. The Supreme Court agreed to hear the case, recognizing the significance of the sovereign immunity question that it had been unable to resolve in 2016.
The Arguments
The FTB argued that the Constitution implicitly guarantees that no state can be dragged into another state's courts without its consent, and that the 1979 decision in Nevada v. Hall was wrongly decided and should be overruled. As a sovereign entity, California should not have to answer to Nevada's judicial system.
- At the time the Constitution was adopted, sovereign immunity was a widely understood and fundamental attribute of statehood, and the states would not have ratified a Constitution that stripped them of this protection against each other.
- The constitutional structure — including provisions like the Full Faith and Credit Clause and the principles underlying the Eleventh Amendment — presupposes that states retain their dignity and sovereign immunity in their dealings with one another.
- Nevada v. Hall was a poorly reasoned outlier that has caused confusion and unfairness, and the principles of stare decisis do not require the Court to maintain a precedent that was wrong from the start.
Hyatt argued that the 40-year-old precedent of Nevada v. Hall was correctly decided and that nothing in the Constitution's text explicitly grants states immunity from suit in each other's courts. Overruling settled precedent would be unjustified, especially after decades of reliance.
- The text of the Constitution does not anywhere say that states are immune from suit in the courts of other states — the Eleventh Amendment only addresses suits in federal courts, not state courts.
- The principle of stare decisis strongly counsels against overruling a precedent that has been the law for four decades and that Congress and the states have relied upon.
- Allowing states to be sued in other states' courts is a practical necessity to ensure that state agencies can be held accountable when they commit wrongs against citizens of other states.