In the early 1990s, Gilbert Hyatt earned substantial royalties from a technology patent. Although he had been a long-time resident of California, in 1991 Hyatt sold his house there and took steps to establish residency in Nevada, including renting an apartment, registering to vote, obtaining insurance, opening a bank account, and acquiring a driver's license. When filing his 1991 and 1992 tax returns, Hyatt claimed Nevada as his primary residence, a state that collects no personal income tax.
The Franchise Tax Board of California suspected the move was a sham and in 1993 launched an audit. Board employees traveled to Nevada to interview Hyatt's estranged family members and shared his personal information with business contacts, sending more than 100 letters and demands for information to third parties. The Board concluded that Hyatt had not moved to Nevada until April 1992 and owed California more than $10 million in back taxes, interest, and penalties. After an 11-year administrative proceeding, the Board upheld the audit, with the appeal still pending.
In 1998, Hyatt sued the Board in Nevada state court alleging torts committed during the audit. The Board sought dismissal on immunity grounds, arguing Nevada courts must apply California law under the Full Faith and Credit Clause. The Nevada Supreme Court held that comity entitled the Board only to the immunity Nevada afforded its own agencies. The Supreme Court granted certiorari and in 2003 affirmed that the Full Faith and Credit Clause did not prohibit Nevada from applying its own law.
After remand, a four-month jury trial resulted in a verdict exceeding $490 million including interest and costs. On appeal, the Nevada Supreme Court upheld a $1 million judgment on one claim but declined to apply Nevada's $50,000 cap on tort liability for state agencies. The Supreme Court in 2016 reversed, requiring the cap, but was equally divided on overruling Nevada v. Hall. On further remand, the trial court was instructed to apply the cap.
The Board petitioned for certiorari a third time, and the Supreme Court granted review in 2018 solely on the question whether Nevada v. Hall should be overruled.
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