Franchise Tax Board of California v. Hyatt

STATE SOVEREIGN IMMUNITY FROM SUIT IN THE COURTS OF THEIR SISTER STATES

Franchise Tax Board contends that Hall is inconsistent with sovereign immunity as understood when the Framers ratified the Constitution and the Court’s subsequent sovereign immunity jurisprudence. Although the Constitution does not explicitly provide for state sovereign immunity in this context, the Board argues that it is possible to infer such principles from the historical background surrounding the Constitution’s ratification—as the Court has done in sovereign immunity cases post-Hall. Franchise Tax Board further asserts that Hall addressed the wrong question—that is, the question is not whether the Constitution explicitly provides for interstate sovereign immunity, but whether the Constitution changed or eliminated the such immunity as it existed prior to the ratification of the Constitution. Based on the historical record, Franchise Tax Board maintains that the Constitution neither changed nor eliminated the such immunity. First, Franchise Tax Board contends that states enjoyed immunity in each other’s courts before the Framers ratified the Constitution. Indeed, Franchise Tax Board argues that states were treated like foreign sovereigns and thus immune from suit in each other’s courts before the Constitution was ratified, as demonstrated by case law from that time period. Second, Franchise Tax Board asserts that there was consensus at the Constitutional Convention—as evidenced by statements made by central historical figures—that states would retain their sovereign immunity under the Constitution and would remain immune from suit in their sister states’ courts without their consent. While much of the debate centered on whether the states would be able amenable before federal courts, Franchise Tax Board contends that the debate implicitly assumed that federal courts were the only remaining forum that states might be subject to suit in. Third, Franchise Tax Board argues that the history surrounding the Eleventh Amendment supports its assertion that there was a consensus that states enjoyed interstate sovereignty. Indeed, as Franchise Tax Board explains, the Eleventh Amendment was adopted in reaction to the Court’s Chisholm decision, which held that states were amenable before federal courts by other states’ citizens. The Eleventh Amendment therefore proves that there was a common understanding that individuals could not sue states without their consent. Finally, Franchise Tax Board highlights that, since the Constitution was ratified, many states (such as New Hampshire, New York, or North Dakota) recognize the principle that states cannot be sued before another state’s courts.

Hyatt counters that Hall should not be overruled because it is consistent with the Constitution-era understanding that sovereigns could be sued in another sovereign’s court. Since Hall was decided, Hyatt argues that there has been no new historical evidence suggesting that is understanding is incorrect. In fact, according to Hyatt, Hall was grounded in a “careful historical analysis.” Hyatt contends that there is a key difference between a state’s immunity in its own courts and its immunity in another sovereign’s courts. Specifically, Hyatt asserts that sovereign immunity is not supposed to protect a sovereign in another sovereign’s courts—rather, whether a sovereign receives such immunity is in the discretion of the other sovereign. Hyatt posits that the Court established this principle in The Schooner Exchange v. McFaddon—namely, that a sovereign has no obligation to grant immunity to another sovereign in its courts. Additionally, Hyatt contends that Hall is premised on three historic basic principles which still stand. First, Hyatt argues, states were independent sovereigns before the Union was created and they enjoyed immunity as foreign sovereigns in each other’s courts. Second, Hyatt maintains that at that time, sovereigns only enjoyed immunity in a foreign state’s court if that state voluntarily granted such immunity. Third, according to Hyatt, neither the Articles of Confederation nor the Constitution changed the nature of sovereign immunity among the ratifying states. Hyatt further asserts that the Tenth Amendment allows states to act unless the Constitution prevents them from doing so—that is, because the Constitution does not explicitly prohibit states from allowing other states to be sued in their courts, courts can hear such cases. In fact, Hyatt continues, the Court’s post-Hall cases discussed the federal courts’ jurisdiction and the states’ amenability before federal courts. Furthermore, Hyatt argues, the Eleventh Amendment remains silent on the amenability of states before their sister states’ courts, while it expressly limits federal courts’ jurisdictions. Finally, Hyatt notes that nowhere in the text of the Constitution is there a limit on a states’ ability to allow their citizens to bring suit against another state in its courts when wronged by the sister state.

CONSIDERING NEVADA V. HALL UNDER STARE DECISIS AND THE LAW OF THE CASE DOCTRINE

Franchise Tax Board asserts that the principle of stare decisis does not prevent the Court form overruling Hall. . Specifically, Franchise Tax Board maintains that Hall does not align with any of the Court’s subsequent sovereign immunity cases and that other stare decisis factors do not require the Court to uphold Hall. Indeed, Franchise Tax Board argues that Hall contradicts the central principles underlying the Court’s sovereign immunity jurisprudence. Franchise Tax Board further points out several decision predating or postdating Hall to show that Congress and the Supreme Court intended to grant states with immunity from suits in sister states’ courts. Additionally, Franchise Tax Board contends that stare decisis is weakest in cases like this one, where a constitutional rule is at issue, because Congress cannot easily change a constitutional rule. Moreover, Franchise Tax Board asserts that Hall has not created any reliance interests because it involves a constitutional rule rather than a statutory interpretation, and constitutional rules do not directly affect people’s behavior. Finally, Franchise Tax Board maintains that Hall is impracticable and inconsistent with the principles of sovereign immunity. In practice, Franchise Tax Board contends, Hall harms the states’ personal and financial resources by forcing them into defending themselves and being held account in another state’s courts. Thus, Franchise Tax Board argues that stare decisis does not prevent the Court from overruling Hall.

Hyatt counters that the Court should not overrule Hall and that the Court should not have granted certiorari in the first place because the Court already decided the question of overruling Hall. Specifically, Hyatt contends that the Court’s earlier consideration of the issue, in which it was equally divided at 4-4, is a definitive decision for the parties to the case even though the decision is not otherwise binding precedent. Additionally, Hyatt argues that the Court cannot reconsider overruling Hall in this case according to the “law of the case” doctrine. Hyatt asserts that the law of the case doctrine protects parties by ensuring that they can rely on a court’s prior decision of an issue in their case. Here, Hyatt maintains, the Court has already heard arguments on overruling Hall and has refused to do so. Thus, even though that decision was 4-4 and has no precedential value, Hyatt contends that it is still binding on Hyatt and Franchise Tax Board. Additionally, Hyatt posits that he has relied on Hall since the beginning of this twenty-year long litigation and relied on Franchise Tax Board’s decision not to challenge Hall. It would be unjust, Hyatt argues, to have Hyatt bear the costs of a litigation pursued in reliance on the Nevada court’s jurisdiction under Hall because the Court already refused to overrule Hall. Moreover, Hyatt argues that Franchise Tax Board has already waived its right to challenge Hall. Specifically, Hyatt contends that Franchise Tax Board chose to waive its defense of sovereign immunity by not asking the Court to overrule Hall when the Court first heard their dispute. Finally, Hyatt maintains that there is no compelling reason to overrule Hall, which is required given the strong presumption against overruling precedent—that is, Hall functions just as it should by providing citizens a forum to ask for redress when being wronged.