High court: Calif. agency can be sued

Friday, April 5, 2002 | 9:15 a.m.

CARSON CITY -- The Nevada Supreme Court Thursday reinstated a suit by a wealthy Las Vegas man who charges he was harassed, his privacy was invaded and he was pursued by California officials who claim he owes $13 million in back income taxes and penalties in that state.

The court, reversing a decision it made in June 2001, said Gilbert P. Hyatt could go forward with his suit in District Court in Clark County against the Franchise Tax Board of California, which claimed it was immune from any suit.

Court documents show Hyatt secured a patent on computer technology that produced more than $100 million in income in late 1991 and 1992. Hyatt moved to Las Vegas in September 1991 to get away from the notoriety in California.

But the auditors from California conducted "hands-on investigations," coming to Nevada several times, questioning his neighbors, employees in stores where he shopped and even his trash collector. These auditors, the Hyatt suit alleges, disclosed confidential and personal information, such as the fact he was under investigation, his address and his Social Security number.

This led to questions about his integrity and moral character, said the suit. The investigation was conducted to harass, annoy and embarrass him to get him to settle the tax claim

Hyatt says the California auditors issued "quasi subpoenas" to persuade Nevada government officials to disclose information. These subpoenas, he said, were illegal.

These California agents, Hyatt said, were out to "extort substantial sums of money from a Nevada resident."

States generally give deference to the laws of another state, said the Supreme Court. California law gives full immunity to the tax board. But in this case the alleged conduct of the California agents violates Nevada policy.

The Supreme Court said Nevada does not allow its government agencies to claim immunity from discretionary acts taken in bad faith or for intentional torts.

"We believe that greater weight is to be accorded Nevada's interest in protecting its citizens from injurious intentional torts and bad faith acts committed by sister states' government employees, than California's policy favoring complete immunity for its taxation agency," the court said.

The court said, however, that an allegation of negligence in the Hyatt suit should be dismissed.