High Court Weighs Extent of State Sovereignty

WASHINGTON (CN) – An attorney for California’s tax agency on Wednesday told the Supreme Court justices a 1979 decision that allows a state to be sued in another state’s court without its consent has upended the relationship between the states that is central to the “genius” of the Constitution.

“Inherent in our federal union is the principle that no state may regulate the government of another state,” said Seth Waxman, who argued for Franchise Tax Board of California on Wednesday. “And just as one state’s governor can’t direct the bureaucracy of another and one state’s Legislature can’t regulate the government actions of another, one state’s judiciary can’t call another state’s government to the bar of the court and sanction it for carrying out its own laws.”

(AP Photo/J. David Ake)

Waxman, an attorney with the firm Wilmer Cutler Pickering Hale and Dorr, called that his “best shot” at convincing the Supreme Court to overturn its holding in Nevada v. Hall, which allows a state to be sued in the courts of another state. The arguments Wednesday spawned vigorous debate over what sovereign rights the Constitution left to the states and when the Supreme Court should reverse its own precedent.

The case comes out of Nevada, where inventor Gilbert Hyatt sued the Franchise Tax Board of California for its conduct while auditing him in the early 1990s. California officials suspected Hyatt moved out of the state later than he claimed in an attempt to skip out on tax payments, while Hyatt said they violated his privacy during the ensuing audit by snooping through his trash and sending his Social Security number to people as part of the investigation.

The state hit Hyatt with a $6 million tax bill, which Hyatt is still contesting in administrative proceedings in California. Hyatt then sued the Golden State in Nevada courts in 1998 and came out a decade later with a $490 million judgment in hand. 

That judgment was whittled down at the Nevada Supreme Court and later at the U.S. Supreme Court, which held California could enjoy the same statutory limits on judgments as Nevada agencies. The high court split, however, on whether California could face suit in Nevada, leaving the lower court judgment in place.

With the case before the Supreme Court again Wednesday, Waxman said the framers were “unanimous” in their belief that states under the new Constitution would not be subject to the jurisdiction of the courts of the other members of the union. That understanding is implicit in the document and without it the states, burdened by debt as they were, would never have agreed to ratify the Constitution, Waxman said. 

“The genius of the Constitution, the structural provisions of the Constitution, was that the states, having had an unsatisfactory experience with confederation, by ratifying, they surrendered their powers to treat each other as legal strangers,” Waxman said. 

But some justices struggled to see through to the same constitutional underpinning that Waxman assured them was there. 

“What do you think in the constitutional design reflects the willingness of one state to give up its power to protect its own citizens from the actions of another state who might intrude directly?” Justice Sonia Sotomayor asked. 

Sotomayor also noted a large number of states have endorsed overturning Hall. She wondered, given this substantial majority, why the states could not band together to adopt a constitutional amendment rather than asking the court to do it for them.

“They’ve got a lot of representatives in the House and in the Senate,” Sotomayor said. “If they’re really excised, they can do something about it, but instead they’re choosing to let us decide that an individual state doesn’t have the right to protect its citizens.” 

Erwin Chemerinsky, a Berkeley School of Law professor who argued for Hyatt, similarly had trouble finding the framers’ intent that states should be immune from suit in other states’ courts, saying when the Constitution limits state authority, it does so explicitly. 

“There is no textual provision in the Constitution that limits the power of a state under the 10th Amendment to define its own jurisdiction to provide a remedy for others when they’re injured,” Chemerinsky said. 

While he said the issue of states being sued in other states’ courts does not come up very often, the justices should be hesitant to do away with their own precedent.

That point spawned a brief debate between Justices Stephen Breyer and Samuel Alito, with Breyer echoing concerns about the court’s image if it makes a habit of overturning its own decisions.

Breyer said every overturned case is a “chink in the armor” that gives people a sense other decisions in other areas of law might be up for debate. 

“And therefore, in many areas, people start to ask us to overrule cases because, from my point of view, there are many wrong cases,” Breyer said. “And that’s true of every judge and law professor. And once you start down the road, you have to be careful for that reason in part.” 

Alito, however, suggested it would be better for the court to move away from its poorly reasoned decisions than to stand by them for the sake of consistency.

“Well, Mr. Chemerinsky, do you think that the public would have greater respect for an institution that says, ‘you know, we’re never going to admit we made a mistake, because we said it and we decided it, we’re going to stick to it even if we think it’s wrong,’ or an institution that says, ‘well you know, we’re generally going to stick to what we’ve done, but we’re not perfect, and when we look back and we think we made a big mistake, we’re going to go back and correct it?’” Alito asked. 

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