Is the Supreme Court Really Going to Regulate Choice of Law Involving States?

Abstract

In its 1973 decision in Hall v. Nevada, the U.S. Supreme Court held that an individual injured in his home state by the agents of another state may sue that other state and that the forum-state (the location of the litigation, the injury and the plaintiff's domicile) was free to apply its own law in the litigation. The Supreme Court dismissed the defendant-state's (Nevada's) claims of immunity and comity. In 2003, in Franchise Tax Board v. Hyatt, (Hyatt I) the Supreme Court reaffirmed this principle unanimously. Coincidentally, the states were reversed from the Hall case. In Hall it was a Californian suing the state of Nevada, while in Hyatt I it was a Nevadan suing a California state agency. In Hyatt I, the Nevada plaintiff sued the California agency for various intentional torts in California's aggressive efforts to collect state income taxes from the Nevadan. However, 13 years later in Hyatt II, the case was back before the U.S. Supreme Court. Mr. Hyatt, the Nevada plaintiff, had won $500 million before a Nevada jury, but that amount was trimmed to about $1 million by the Nevada Supreme Court. California took the case to the U.S. Supreme Court, urging that Hall be overruled and the California be given immunity. The Court (with only eight members due to Justice Scalia's death) split 4-4 on that question, but 6-2 held that as a matter of the Full Faith and Credit Clause, Nevada could award no more than $50,000 -- the maximum amount it would allow to be collected against a Nevada agency. The article argues that neither overruling Hall, nor the new rule that states must apply their own tort caps to other states, is consistent with full-faith-and-credit jurisprudence.

Keywords: Full Faith and Credit, comity, Hall v. Nevada, Hyatt, conflict of laws, choice of law

JEL Classification: K10, K13, K30, K40, K41