LV man’s right to sue California tax board upheld

Thursday, April 24, 2003 | 11:06 a.m.

SUN STAFF AND WIRE REPORTS

WASHINGTON -- The U.S. Supreme Court has upheld the ruling of the Nevada Supreme Court that said a Las Vegas inventor had the right to sue a California tax board for trespassing on his property.

Gilbert P. Hyatt, who moved to Nevada from California in 1991, collected millions of dollars after he patented a computer microprocessor chip. But he has for years battled the state of California over his taxes.

The case stems from when Gilbert sued the California Franchise Tax Board for sifting through his mail and trash as part of California's effort to obtain taxes on $40 million it said he owed in patent licensing fees.

The Supreme Court ruling ultimately rejects California's contention that Gilbert could not sue California in Nevada courts. The California tax board claimed to be immune from the suit under state sovereignty provisions in the Constitution, but the high Nevada court and the U.S. Supreme Court rejected the argument.

The California agency "contends that this case demonstrates the need for a new rule under the (Constitution's) Full Faith and Credit Clause that will protect 'core sovereignty' interests," such as collecting taxes, Justice Sandra Day O'Connor wrote in the court's opinion. "We disagree."

O'Connor recognized that California has the sovereign right to collect taxes. But to accept California's plea for immunity "would elevate California's sovereignty interests above those of Nevada, were we to deem this lawsuit an interference with California's 'core sovereign responsibilities.' "

O'Connor cited a number of cases that helped formulate the ruling, including another Nevada case when the shoe was on the other foot. In that 1979 case, a University of Nevada employee was in a car accident with California residents, who sued the state of Nevada. Nevada tried to invoke sovereign immunity in order to apply a state law that capped damages in such cases, but the Supreme Court ruled against Nevada.

In this case the California tax board also had complained about the expense of out-of-state litigation, but the court ruled that "those burdens do not distinguish this case from any other out-of-state lawsuit against California or one of its agencies," O'Connnor wrote.

Hyatt and a representative from the California attorney general's office were not available for comment.