State Sovereign Immunity: Franchise Tax Board of California v. Hyatt

There is a principle in the legal field called “stare decisis.” From Latin, it translates literally to “stand by what is decided.” In layman’s terms—and in law—it means that a court ought to apply the same reasoning as it did in a prior case, and ought to rule analogously to its earlier decisions in similar cases. It is not a set-in-stone policy that entertains no deviation; the Supreme Court has, throughout its history, overruled a few dozen of its decisions. Think of Plessy v. Ferguson in 1896, in which the Court held that racial segregation was constitutional, versus Brown v. Board of Education of Topeka, Kansas in 1954, in which it held that racial segregation was unconstitutional. On Monday, the Court added one to that list, overruling one of its cases from 1979. While the subject matter of the case (state sovereign immunity) may sound anemic and technical, this Court’s demonstration—that it is not averse to overruling an earlier case—is anything but. For the ardent Court-watcher, you may remember that the question of whether the Court will overrule Roe v. Wade (the case in which the Court recognized a woman’s right to privacy in her desire to obtain an abortion) was omnipresent during the confirmation hearing of Justice Brett M. Kavanaugh. And while state sovereign immunity has virtually nothing to do with abortion, the five-member conservative bloc of the Court has now hinted that it is open to deviating from stare decisis. Here is my analysis of the Court’s decision on Monday in Franchise Tax Board of California v. Hyatt.


Introduction

In the legal field, when we use the term “precedent,” we refer to a court’s decision in an earlier case. In general, courts are bound by its precedents. Decisions are, after all, “caselaw,” in that any case similar to one before it ought to be decided in the same way. A court applies its precedent to ensure that one case is not decided one way, and a subsequent, analogous case is decided in the polar opposite fashion. This principle—that courts stand by what they have decided—is, in Latin, stare decisis. Can a court undercut stare decisis and overturn a precedent? Yes. But as Chief Justice Roberts recognized last term in Trump v. Hawaii, it should only do so when the earlier decision was “gravely wrong.” Indeed, in the past decade, the Supreme Court has overruled one of its earlier cases only a half-dozen times.

When we think of instances in which the Supreme Court has overturned one of its earlier cases, we often think of decisions like Plessy v. Ferguson in 1896 and Brown v. Bd. of Edu. of Topeka, Kansas in 1954. In Plessy, the Court held that the doctrine of “separate but equal”—referring to racial segregation in public facilities—was constitutionally permissible. But in Brown, the Court unanimously overruled Plessy, holding that “separate but equal” is inherently unequal, and racial segregation in public schools is contrary to our Constitution. Other examples include: Minersville School District v. Gobitis in 1940 and West Virginia Bd. of Edu. v. Barnette in 1943, regarding the free exercise of religion in public schools; Austin v. Michigan Chamber of Commerce in 1990 and Citizens United v. Federal Election Comm’n in 2010, concerning campaign finance laws; and Baker v. Nelson in 1972 and Obergefell v. Hodges in 2015, with respect to the legality of same-sex marriage.

On Monday, in Franchise Tax Bd. of California v. Hyatt, the Supreme Court added one to that list, overruling its 1979 decision in Nevada v. HallHyatt concerns whether a state enjoys sovereign immunity from private suits filed in another state’s courts. Hall said it does not; Hyatt now says it does. Justice Thomas wrote the Court’s decision for a 5:4 majority, and Justice Breyer dissented.

Case Background

Hyatt concerns a branch off of the Eleventh Amendment doctrine of state sovereign immunity: whether a state may be haled into another state’s courts without its consent. To clarify, suppose I move from Colorado to Wyoming (perhaps because Wyoming has no personal income tax), but a Colorado tax collection agency suspects I am faking my move so as to avoid paying Colorado personal income taxes. As a result, the tax collection agency audits my personal finances. Suppose during the course of the audit I feel the tax collection agency causes me personal injury, and I feel the need to file a tort suit against the agency. Now, if I file my lawsuit, since the tax collection agency is an entity of the State of Colorado, I would in fact be suing the State of Colorado, not the agency itself. This brings us to the principal question in this realm of state sovereign immunity: can I sue the State of Colorado without its consent in a Wyoming state court?

In 1979, in Nevada v. Hall, the Supreme Court addressed this question for the first time. The State of Nevada argued that the answer implicitly was “no,” based on the “common understanding” embodied in the Constitution “that no sovereign is amenable to suit without its consent.” Now-retired Justice John Paul Stevens, however, disagreed and held for a 6:3 majority that the Constitution does not protect states from being sued in the courts of another state.

But on Monday, the Court readdressed its holding in Hall and concluded, by a 5:4 vote, that Hall was decided incorrectly.

Justice Thomas’ Majority Opinion

After giving a brief overview of how this iteration of Franchise Tax Bd. of California v. Hyatt came before the Court (the case has been before the Supreme Court three times now), Justice Clarence Thomas wasted no time in declaring that Hall “is contrary to our constitutional design and the understanding of sovereign immunity shared by the States that ratified the Constitution.”  To Thomas, Hall‘s denial of sovereign immunity in the context of private suits in other states “misreads the historical record and misapprehends the implicit ordering of relationships within the federal system,” which are required to allow the Constitution to function as the Framers intended (internal quotation marks omitted).

Thomas begins his majority opinion by demonstrating that, at the time of the nation’s founding, it was widely accepted that one state could not be dragged without its consent into the courts of another state. After the American Revolution, the states viewed themselves as “fully sovereign nations.” (Or, as the final paragraph of the Declaration of Independence declares, they were “Free and Independent States” with “full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do.”) And as the Supreme Court recognized in Federal Maritime Comm’n v. South Carolina Ports Authority (2002), “[a]n integral component” of that sovereignty was the states’ “immunity from private suits.” Thomas quotes Alexander Hamilton in The Federalist No. 81 as saying:

It is inherent in the nature of sovereignty not to be amenable to the suit of an individual without its consent. This is the general sense and the general practice of mankind; and the exemption, as one of the attributes of sovereignty, is now enjoyed by the government of every State in the Union.

This rule stemmed largely from the recognition of sovereign immunity by the common law and the law-of-nations. At common law, “no suit or action [could] be brought against the king, even in civil matters, because no court [could] have jurisdiction over him” (quoting 1 William Blackstone, Commentaries on the Laws of England 235 (1765)). And under international law, a sovereign state was “exemp[t] . . . from all [foreign] jurisdiction” (quoting 2 E. de Vattel, The Law of Nations § 55, p. 155 (J. Chitty ed. 1883)).

In light of this evidence, Thomas concludes, it was “well settled” to the Founding Fathers that a state was immune from being hauled into another state’s courts without its consent. And from the Founding Era onward, each state “retained [this] aspect[] of sovereignty ‘except as altered by the plan of the [Constitutional] Convention or certain constitutional Amendments'” (quoting Alden v. Maine, 527 U.S. 706, 713 (1999)).

For a brief period after ratification, the states relinquished part of that sovereign immunity to federal courts (see Article III § 2 of the Constitution). States needed a neutral forum in which they could litigate disputes against one another. They recognized the federal courts, Thomas writes, as “superior tribunal[s]” who could levy binding decisions upon “coequal sovereigns.” The states also recognized that the federal courts had jurisdiction over suits in which one of them was sued by the United States.

However, the Antifederalists were concerned about whether Art. III § 2 extended federal court jurisdiction to private suits between a state and a private citizen of another state—not between two states or between a state and the federal government. To allay these fears, James Madison and John Marshall asserted that the Antifederalists’ reading of such an extension of Art. III was unfounded. Madison wrote:

[A federal court’s] jurisdiction in controversies between a state and citizens of another state is much objected to . . . . It is not in the power of individuals to call any state into court. The only operation [a federal court] can have, is that, if a state should wish to bring a suit against a citizen, it must be brought before the federal court[s].

And John Marshall agreed: “With respect to disputes between a state and the citizens of another state, [a federal court’s] jurisdiction has been decried with unusual vehemence. I hope no gentleman will think that a state will be called at the bar of the federal court.”

But the Antifederalists were prescient; in 1793, the Supreme Court confronted Chisholm v. Georgia, a case concerning the private suit of a citizen of one state against another state. Contrary to what Madison and Marshall had stated about Art. III § 2, the Chisholm Court held that Art. III did indeed permit a citizen of one state to sue another state in federal court.

What followed was a public and ubiquitous uproar. Just two years later, the states ratified the Eleventh Amendment, nullifying the Court’s decision in Chisholm. The Amendment provides: “The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subject of any Foreign State” (emphasis added).

An astute observer might point out that the text of the Eleventh Amendment immunizes states from being privately sued in federal courts—not necessarily from being privately sued in another state’s courts (as Hall and Hyatt discuss). The Court acknowledged this distinction in Alden v. Maine in 1999, and Justice Thomas admits it here in Hyatt as well. But Thomas—quoting the Court’s exact same response in Alden—replies that the “natural inference” from the speed at which the Eleventh Amendment was adopted is that “the Constitution . . . preserve[s] the States traditional immunity from private suits” in general. And to reinforce this reply, Thomas cites six instances in which the Supreme Court has construed the Constitution’s stance on state sovereign immunity as prohibiting suits against nonconsenting states. As a result, Thomas holds that a state’s immunity from being forced to respond to a suit in another state’s courts “is a historically rooted principle embedded in the text and structure of the Constitution.”

Finally, Thomas addresses stare decisis and the fact that it calls for the Court to adhere to its prior (but contrary) conclusion in Hall. “[S]tare decisis is ‘not an inexorable command,'” Thomas writes (quoting Pearson v. Callahan, 555 U.S. 223, 233 (2009)). Furthermore, stare decisis is “at its weakest when [the Court] interpret[s] the Constitution because [the Court’s] interpretation can be altered only by constitutional amendment.” When determining whether to overrule a prior case, the Court has identified a number of principles to consider, including “the quality of the decision’s reasoning, its consistency with related decisions, [and] legal developments since the decision.” To Thomas, each of these three factors “support[s] our decision to overrule Hall.”

In sum, the Court holds that Hall “is irreconcilable with our constitutional structure and with the historical evidence showing a widespread . . . understanding that States retained immunity from private suits,” especially “in other courts.”

Chief Justice Roberts and Justices Alito, Gorsuch, and Kavanaugh joined Thomas in his opinion.

Justice Breyer’s Dissent

Justice Stephen Breyer—joined by Justices Ginsburg, Sotomayor, and Kagan—filed a dissent, saying he “can find no good reason to overrule Hall.”

Breyer first draws a distinction in the question regarding the role the Constitution plays in this realm of state sovereign immunity: does the Constitution “require[] each State to grant its sister States immunity,” or does it instead “permit[] a State to grant or deny its sister States immunity as it chooses” (emphasis in original)? Hall sided with the latter interpretation—when a private citizen sues State A in State B’s courts, State B may choose to grant State A sovereign immunity and dismiss the suit, or deny State A sovereign immunity and allow the suit to proceed (the “choice-based approach”). But the Court’s majority opinion here in Hyatt sides with the former intrepretation—that State B must give State A sovereign immunity and dismiss the suit (the “requirement-based approach”). This, Breyer argues, is the wrong interpretation of what the Constitutes says about state sovereign immunity.

Hall recognized that during the Founding Era, foreign countries extended sovereign immunity to other countries “not as a matter of legal obligation but as a matter of choice” in the spirit of “comity[, ] grace[,] or consent” (emphasis added). Two of the Court’s early decisions—namely, Schooner Exchange v. McFaddon (1812) and The Santissima Trinidad (1822)—affirmed this “choice-based” approach to extending sovereign immunity. In fact, in Santissima Trinidad, Justice Story wrote that sovereign immunity “stands upon principles of public comity and convenience” (20 U.S. (7 Wheat.) 283, 353), and, therefore, the extension of sovereign immunity “may be withdrawn upon notice at any time” (ibid.).

Hall additionally recognized that the Constitution’s ratification did not change this “choice-based” interpretation of sovereign immunity, even with regard to America’s states rather than foreign countries. Hall noted that neither the Full Faith and Credit Clause of Article IV nor the Eleventh Amendment indicated a switch from the “choice-based” to the “requirement-based” approach. Furthermore, Hall stressed that to infer the “requirement-based” approach from only “the structure of our Constitution and nothing else” would “intru[de] on the sovereignty of the States—and the power of the people—in our Union” (440 U.S., at 426–427).

The majority here in Hyatt questions Hall historical interpretation of the Founding Era and the Constitution’s ratification, and the conclusion Hall draws therefrom. Breyer, however, “do[es] not find the majority’s arguments convincing.”

First, recall that Justice Thomas said “it was well settled that States were immune under both the common law and the law of nations.” That may be so, Breyer replies. But at common law and under the law of nations, “[d]id one sovereign have an absolute right to an exemption from the jurisdiction of the courts of another, or was that exemption . . . a matter of consent that a sovereign might withdraw” (emphasis added)? Hall concluded it was a matter of consent. But, Breyer argues, Thomas’ majority opinion cites nothing that says otherwise. In addition, the majority opinion adduced statements from James Madison and John Marshall declaring that the United States does not have jurisdiction over private suits between a citizen and a state. Breyer counters that those statements “‘concerned questions of federal-court jurisdiction'” over such suits, a “matter[] entirely distinct from the question of state immunity at issue here” (quoting Hall, 440 U.S., at 420) (emphasis added).

Second, the majority moves from pre-ratification history to the effect of the Constitution’s language on state sovereign immunity. The majority concluded that the Constitution implicitly gives the states an absolute right to sovereign immunity (the “requirement-based” approach), a conclusion “embed[ded] . . . within the constitutional design” and indicated in “the plan of the Convention.” Breyer argues there are a number of problems with this conclusion. First, abstract concepts—such as the “constitutional design” and the “plan of the convention”—are “difficult to apply,” are “open to differing interpretations,” and “suffer the additional disadvantage that they do not actually appear anywhere in the Constitution” (quoting Federal Maritime Comm’n v. South Carolina Ports Authority, 535 U.S. 743, 778 (2002) (Breyer, J., dissenting)). Second, Breyer insists nothing in even the “plan of the convention” suggests that the Constitution transformed the choice-based approach present during the pre-ratification era into the requirement-based approach. The majority posits that, via the intention of the Framers, the Constitution indirectly converted state sovereign immunity from a privilege based on choice to a right based on necessity. Breyer replies:

Why would the Framers, silently and without any evident reason, have transformed sovereign immunity from a permissive immunity predicated on comity and consent into an absolute immunity that States must accord one another? The Court in Hall could identify no such reason. Nor can I.

Finally, Breyer addresses the majority’s language regarding stare decisis. First, overturning a case requires “special justification,” e.g., the case was blatantly incorrect (Kimble v. Marvel Entertainment, LLC, 576 U.S. ____, ____ (slip op., at 8)). Granted, Hall was decided 6:3, and the three dissenters admitted Hall‘s majority opinion was “plausible” (440 U.S., at 427). Breyer also accepts that “reasonable jurists might disagree about whether Hall was correct.” But does “that very fact—that Hall is not obviously wrong—[not ] show[] that [Hyatt‘s] majority is obviously wrong to overrule it?” Second, Breyer asserts that “[t]he law has not changed significantly since” Hall and “has not left Hall a relic of an abandoned doctrine”—let alone to the extent of overruling it entirely. Third, a number of the Court’s decisions post-Hall align with the Hall Court’s understanding of state sovereign immunity. Fourth, Hall‘s three dissenters worried about its “practical implications.” For example, Hall‘s choice-based approach to state sovereign immunity urges, say, State A to use caution when interacting with the citizens of State B. (For, if State A is not cautious and the citizen files suit in State B’s courts, State B may always choose to rescind State A’s immunity.) Hall‘s three dissenters feared State A might begin to use an abundance of caution, “induc[ing] some ‘Balkanization’ in state relationships as States try to isolate assets from foreign judgments and generally reduce their contacts with other jurisdictions” (Hall, 440 U.S., at 443 (Rehnquist, C.J., dissenting)). But this concern, Breyer responds, was not realized: In the 40 years since Hall, there have been only 14 cases in which a state court exercised jurisdiction over a private suit between a citizen and a different state—and in some of these cases, the forum state ended up dismissing the state as a courtesy, in a bow to sovereign immunity.

As a whole, Breyer weighs heavily the danger in “overrul[ing] a decision only because five Members of a later Court come to agree with earlier dissenters on a difficult legal question.” This is especially so with regard to Hall, a “well-reasoned decision that has caused no serious practical problems.” Based on this concern, Breyer respectfully dissents.

Staring Down Stare Decisis and Potential Implications

The direct effects of Hyatt are easily visible: (1) The Franchise Tax Board of California, after its third trip to the Supreme Court, now has immunity from a private citizen’s suit against it in a Nevada state court; and (2) the Court has demonstrated that the Constitution requires states to give each other immunity from similar suits.

But Justice Breyer’s dissenting opinion hints at a deeper, more fundamental question: Was the Court’s decision in Hyatt a one-off, or does it signal the Court’s openness to diverge from stare decisis? Justice Breyer said the following:

Each time the Court overrules a case, the Court produces increased uncertainty. To overrule a sound decision like Hall is to encourage litigants to seek to overrule other cases; it is to make it more difficult for lawyers to refrain from challenging settled law; and it is to cause the public to become increasingly uncertain about which cases the Court will overrule and which cases are here to stay.

I understand that judges, including Justices of this Court, may decide cases wrongly. I also understand that later-appointed judges may come to believe that earlier-appointed judges made just such an error. And I understand that, because opportunities to correct old errors are rare, judges may be tempted to seize every opportunity to overrule cases they believe to have been wrongly decided. But the law can retain the necessary stability only if this Court resists that temptation, overruling prior precedent only when the circumstances demand it.

A judge’s duty is to interpret the law—as it is plainly written or, if ambiguous, as history, scholarship, and the law’s authors describe it—and apply it in cases to answer questions of the law. Necessarily, then, the law attains stability and predictability when it is interpreted and applied uniformly. This stability and predictability is undermined when a judge interprets and applies the law in one way, and another judge interprets and applies it in a different (or in the opposite) way. Of course, laws change, in which cases judges must interpret and apply the law at the time in which its latest iteration is in force. An earlier decision may be starkly different from a later decision, if the law changes and requires such a difference. But in cases concerning Constitutional law (and our fundamental Constitutional rights), that stability and predictability is ever more integral. And, save for instances in which the Constitution is amended, judges ought to be uniform in their interpretations and applications of the Constitution.

State sovereign immunity is one such instance. It is embodied in Article III Section 2 and the Eleventh Amendment. Deviations in the Constitution’s language regarding state sovereign immunity are expected between the time prior to the Eleventh Amendment and the time after. But Nevada v. Hall (1979) and Franchise Tax Bd. of California v. Hyatt (Monday) both took place after the ratification of the Eleventh Amendment in 1795. As a result—and as Justice Breyer notes in his dissent—the Court’s diametrically-opposed decisions in Hall and Hyatt undermine the stability and predictability in the law of state sovereign immunity.

What does this mean for other cases concerning Constitutional law? Unless the Constitution is amended or a prior case interpreting the Constitution was gravely incorrect, we should expect the Supreme Court to abide by its Constitutional-law precedents. But on Monday, the five-member conservative bloc of the Court upended that expectation for one of its such precedents.

Perhaps Hyatt was a one-off in this regard. Or, perhaps it is an indication that the Court’s conservative bloc is willing to reconsider some of the Supreme Court’s non-unanimous, liberally-decided prior decisions involving our Constitutional entitlements. For the ardent Court-watcher the cases that immediately come to mind are: Roe v. Wade, 410 U.S. 113 (1973), in which the Court in a 7:2 holding recognized a woman’s right to privacy in her desire to obtain an abortion; and Planned Parenthood of Southeastern Pennsylvania v. Casey, 505 U.S. 833 (1992), in which the Court reinforced Roe and held 5:4 that a state cannot place an “undue burden” on a woman’s right to seek an abortion.

Of course, state sovereign immunity resides in an entirely different realm than abortion and the right to privacy. But at any rate, if Hyatt is a signal of the Court’s temperament toward stare decisis, Justice Breyer’s dissent suitably says: “Today’s decision can only cause one to wonder which cases the Court will overrule next.”

7 thoughts on “State Sovereign Immunity: Franchise Tax Board of California v. Hyatt

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