The long running battle between Gilbert Hyatt and the Franchise Tax Board of California here in Nevada is likely nearing a conclusion. The Nevada Supreme Court listed the Hyatt case in their list of Forthcoming Opinions. Given that the FTB’s liability is up to $500,000,000 (if the lower court decision is upheld), this is a very important decision.
For those unfamiliar with the case, Gilbert Hyatt moved to Nevada from California. He moved in October 1991, but the FTB held that he didn’t move until April 1992, conveniently after Mr. Hyatt received significant income from patents he held. The FTB assessed tax, penalties, interest, and the civil fraud penalty.
In January 1998, Mr. Hyatt filed a lawsuit against the FTB, alleging that the FTB committed torts during the audit, including invasion of privacy, outrageous conduct, abuse of process, fraud, and negligent misrepresentation. The FTB challenged that Mr. Hyatt could sue the tax agency; California law immunizes the FTB from lawsuits. That portion of the case went to the US Supreme Court; the US Supreme Court ruled in 2003 that he could sue the tax agency.
The case was heard in 2008 here in Las Vegas. Mr. Hyatt won and was awarded $138.8 million of actual damages and $250 million in punitive damages. (Including interest, the amount that Mr. Hyatt is due is up to $500 million.) The FTB appealed; that appeal was heard in May 2012 by the Nevada Supreme Court. (Nevada does not have intermediate courts of appeal.) That’s the decision that will be released tomorrow. I will report on the decision tomorrow (Thursday) afternoon.