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Abstract

Twenty years ago, California reacted with suspicion to inventor Gilbert Hyatt’s move to Nevada, concluding that he had not actually changed his residency to Las Vegas in time to avoid millions in state taxes based on a lucrative patent assignment. So convinced was California, it engaged in highly questionable shadowing of Hyatt (including dumpster dives). A jury later found this shadowing sufficiently abhorrent to support a multi-million dollar damage verdict in Hyatt’s favor as part of Hyatt’s invasion of privacy/abuse of power claim. Ultimately, after two trips to the U.S. Supreme Court, the verdict was substantially reduced and then limited by Nevada’s own cap on damages levied against the government. Despite the long-running tort litigation and California administrative proceedings regarding Hyatt’s final tax bill, it appears that his net award will be quite modest. This is largely because of a Nevada damages cap of $50,000 in actions against the government (since increased to $100,000), no matter how outrageous the conduct or extensive the injuries inflicted.

Most constitutionally important about the Hyatt decision is not only the Full Faith and Credit Clause decision (finding that claims by a resident against a foreign state entity were limited by the forum state’s own ceiling on damages against forum state entities) but also that Hyatt nearly resulted in the demise of Nevada v. Hall, the U.S. Supreme Court’s 1979 decision permitting suits against a state by residents of another state. Hall survived Hyatt—for the moment—but the Hall precedent remains vulnerable, perhaps surviving only because of Justice Scalia’s untimely death. Unfortunately, Congress’s confirmation of Scalia successor Neil Gorsuch did not examine the nominee’s position on the important state sovereignty and individual rights issues presented in Hyatt and Hall. This makes it hard to know if Hall will survive its next examination. States should reconsider whether they have engaged in unduly harmful interstate competition and erected undue barriers to recovery against themselves or states inflicting harm on their citizens. The Hall and the Hyatt litigation should also prompt government agencies to consider the apt limits of their investigative zeal and should similarly prompt victims of excessive state investigatory zeal to think carefully about the proportionality of response.

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