Posts Tagged ‘GilbertHyatt’

Hyatt Decision a Win for FTB as Far as Damages, but Decision Upheld that FTB Committed Fraud

Thursday, September 18th, 2014

The Nevada Supreme Court released its decision today in Franchise Tax Board of California v. Hyatt. The decision is definitely a win for the FTB as far as damages; however, the Court upheld that the FTB committed fraud against Mr. Hyatt and the damage award for fraud. Overall, some portions of the District Court decision were reversed, other portions were upheld, and still other portions were remanded for more proceedings.

First, for those who want to read more than the summary I’m going to present, I strongly recommend reading the opinion. It’s quite readable though long (it runs 68 pages). That it runs this long for a unanimous decision just goes to show how lengthy this litigation has been.

As for the decision:
1. The Court upheld that the FTB is not immune to lawsuits for intentional torts and bad-faith conduct. Thus, Mr. Hyatt’s lawsuit has basis in law.

2. Most of Mr. Hyatt’s claims fail, though, as a matter of law. There are two exceptions: fraud and intentional infliction of emotional distress (IIED). Those claims are valid as far as law per the Nevada Supreme Court.

3. The Court upheld the jury’s finding that the FTB made false representation to Mr. Hyatt, and upholds the award of $1,085,281.56 of damages.

4. The Court upheld the jury’s finding that the FTB committed IIED. However, the damages were not upheld. This has been remanded back to the District Court for a new trial on the amount of damages committed against Mr. Hyatt.

5. The Court ruled that “Because punitive damages would not be available against a Nevada government entity, we hold, under comity principles, that FTB is immune from punitive damages.” This is a huge win for the FTB, as $250 million of punitive damages were awarded at trial.

6. The FTB should look at this result and realize the egg on their face…but probably won’t.


1. The Court gives an excellent history of the case, and its winding road to the US Supreme Court and back to the District Court for trial. There are still more trials to come besides the remand proceedings. Mr. Hyatt’s appeal of the FTB’s rulings against him has still not been heard in California. Additionally, Mr. Hyatt sued the FTB in federal district court in Sacramento alleging that the FTB has deprived him of his constitutional rights.

The FTB first again challenged whether or not Mr. Hyatt could sue the FTB. There is a legal principle called “comity.” Generally, under comity, “…[A] forum state may give effect to the laws and judicial decisions of another state based in part on deference and respect for the other state, but only so long as the other state’s laws are not contrary to the policies of the forum state.” The FTB loses here:

Because we conclude that discretionary-function immunity under NRS 41.032 does not include intentional torts and bad-faith conduct, a Nevada government agency would not receIve immunity under these circumstances, and thus, we do not extend such immunity to FTB under comity principles, as to do so would be contrary to the policy of this state.

2. The Court then looked at the torts that Mr. Hyatt alleged the FTB committed. “Hyatt brought three invasion of privacy causes of action-intrusion upon seclusion, publicity of private facts, and false light-and additional causes of action for breach of confidential relationship, abuse of process, fraud, and intentional infliction of emotional distress.”

Mr. Hyatt loses the intrusion upon seclusion and publicity of private facts because the facts that the FTB released (his personal confidential information including his social security number) were in the public domain previously.

The FTB next challenges whether there is a “false light” tort. The Nevada Supreme Court says that there is such a tort. The FTB also appeals arguing that Mr. Hyatt did not present any evidence that anyone thought he was a ‘tax cheat’ based on the litigation list published by the FTB or the FTB’s third-party contacts.

The record before us reveals that no evidence presented by Hyatt in the underlying suit supported the jury’s conclusion that FTB portrayed Hyatt in a false light. Because Hyatt has failed to establish a false light claim, we reverse the district court’s judgment on this claim. [citation omitted]

The FTB argues that there cannot be a breach of a confidential relationship because there was no such relationship. The Court looked at what causes a confidential relationship as far as a tort.

But in conducting the audits, FTB was not required to act with Hyatt’s interests in mind; rather, it had a duty to proceed on behalf of the state of California’s interest. Moreover, the parties’ relationship was not akin to a family or business relationship. Hyatt argues for a broad range of relationships that can meet the requirement under Perry, but we reject this contention. Perry does not provide for so expansive a relationship as Hyatt asks us to recognize as sufficient to establish a claim for a breach of confidential relationship. Thus, FTB and Hyatt’s relationship cannot form the basis for a breach of a confidential relationship cause of action, and this cause of action fails as a matter of law. The district court judgment in Hyatt’s favor on this claim is reversed. [citations and footnotes omitted]

The FTB then challenges the abuse of process tort. The FTB asserted that there can’t be abuse of process as the FTB did not use the judicial process. The Court agreed:

Because FTB did not use any legal enforcement process, such as filing a court action, in relation to its demands for information or otherwise during the audits, Hyatt cannot meet the requirements for establishing an abuse of process claim.

3. The next tort was fraud. “To prove a fraud claim, the plaintiff must show that the defendant made a false representation that the defendant knew or believed was false, that the defendant intended to persuade the plaintiff to act or not act based on the representation, and that the plaintiff had reason to rely on the representation and suffered damages.”

The FTB argued that its statements to Mr. Hyatt that it would provide him with “courteous treatment” and keep his information confidential weren’t sufficient basis for a fraud claim, and even if that was sufficient there wasn’t any evidence that such representations were false when made. On the other hand, Mr. Hyatt claims that the FTB misrepresented their promises.

Here, the Court ruled in favor of Mr. Hyatt.

The record before us shows that a reasonable mind could conclude that FTB made specific representations to Hyatt that it intended for Hyatt to rely on, but which it did not intend to fully meet. FTB represented to Hyatt that it would protect his confidential information and treat him courteously. At trial, Hyatt presented evidence that FTB disclosed his social security number and home address to numerous people and entities and that FTB revealed to third parties that Hyatt was being audited.

There’s more here, and I’ll get to this in my views (below, in #6).

The FTB then argued that there should be a limit on the damages based on fraud (based on the FTB being immune from fraud in California and there being certain limits in Nevada), while Mr. Hyatt argues that the FTB isn’t entitled to any caps on damages. The Court agreed with Mr. Hyatt:

This state’s policy interest in providing adequate redress to Nevada citizens is paramount to providing FTB a statutory cap on damages under comity. Therefore, as we conclude that allowing FTB a statutory cap would violate this state’s public policy in this area, comity does not require this court to grant FTB such relief. As this is the only argument FTB raised in regard to the special damages awarded under the fraud cause of action, we affirm the amount of damages awarded for fraud. [citation omitted]

4. The court then looked at intentional infliction of emotional distress (IIED). The FTB argued that because Mr. Hyatt didn’t provide any medical evidence, he can’t claim IIED. Mr. Hyatt disagreed, and that given that he was severely harmed that the proof level can be less than medical records. The Court agreed with Mr. Hyatt, and that this case was on the more extreme end of the scale:

As explained above in discussing the fraud claim, FTB disclosed personal information that it promised to keep confidential and delayed resolution of Hyatt’s protests for 11 years, resulting in a daily interest charge of $8,000. Further, Hyatt presented testimony that the auditor who conducted the majority of his two audits made disparaging remarks about Hyatt and his religion, was determined to impose tax assessments against him, and that FTB fostered an environment in which the imposition of tax assessments was the objective whenever an audit was undertaken…

In support of his lIED claim, Hyatt presented testimony from three different people as to the how the treatment from FTB caused Hyatt emotional distress and physically affected him. This included testimony of how Hyatt’s mood changed dramatically, that he became distant and much less involved in various activities, started drinking heavily, suffered severe migraines and had stomach problems, and became obsessed with the legal issues involving FTB. We conclude that this evidence, in connection with the severe treatment experienced by Hyatt, provided sufficient evidence from which a jury could reasonably determine that Hyatt suffered severe emotional distress.

However, the damage award for this claim was not upheld, and the Court remanded the case back to the District Court for a new trial on the damages. The Court concluded that there was evidentiary and jury instruction errors.

5. The FTB appealed whether punitive damages are allowed. “FTB argues that it is entitled to immunity from punitive damages based on comity because, like Nevada, California law has expressly waived such damages against its government entities. California law provides full immunity from punitive damages for its government agencies.” The Court finds that comity warrants that the FTB be immune from punitive damages:

The broad allowance for punitive damages under NRS 42.005 does not authorize punitive damages against a government entity. Further, under comity principles, we afford FTB the protections of California immunity to the same degree as we would provide immunity to a Nevada government entity as outlined in NRS 41.035(1). Thus, Hyatt’s argument that Nevada law provides for the award of punitive damages against FTB is unpersuasive. Because punitive damages would not be available against a Nevada government entity, we hold that under comity principles FTB is immune from punitive damages. We therefore reverse the portion of the district court’s judgment awarding punitive damages against FTB.


6. My thoughts: If I as a tax professional were to conduct myself in the manner that the FTB did, I would almost certainly be liable for truckloads of damages and would lose my license. Consider that the Nevada Supreme Court called the conduct of the FTB “extreme.” Consider also that at trial the FTB called its conduct typical:

Tax agents rummaged through his trash without warrants, visited business partners and doctors, and shared his Social Security Number and other personal information with the media. This is outrageous behavior and I call on the FTB to rein in their agents. What really galled me is the FTB testified in open court that this level of harassment was only a typical audit. If true, then the stormtroopers are alive and well at the FTB.

The author of the above quote, Bill Leonard, knows what he’s talking about. He’s a former member of the California Board of Equalization, the California tax agency which hears appeals from the FTB. There really isn’t much to add to that description. But let me include the entire text of what the Nevada Supreme Court wrote in affirming that the FTB committed fraud:

The record before us shows that a reasonable mind could conclude that FTB made specific representations to Hyatt that it intended for Hyatt to rely on, but which it did not intend to fully meet. FTB represented to Hyatt that it would protect his confidential information and treat him courteously. At trial, Hyatt presented evidence that FTB disclosed his social security number and home address to numerous people and entities and that FTB revealed to third parties that Hyatt was being audited. In addition, FTB sent letters concerning the 1991 audit to several doctors with the same last name, based on its belief that one of those doctors provided Hyatt treatment, but without first determining which doctor actually treated Hyatt before sending the correspondence. Furthermore, Hyatt showed that FTB took 11 years to resolve Hyatt’s protests of the two audits. Hyatt alleged that this delay resulted in $8,000 in interest per day accruing against him for the outstanding taxes owed to California. Also at trial, Hyatt presented evidence through Candace Les, a former FTB auditor and friend of the main auditor on Hyatt’s audit, Sheila Cox, that Cox had made disparaging comments about Hyatt and his religion, that Cox essentially was intent on imposing an assessment against Hyatt, and that FTB promoted a culture in which tax assessments were the end goal whenever an audit was undertaken. Hyatt also testified that he would not have hired legal and accounting professionals to assist in the audits had he known how he would be treated. Moreover, Hyatt stated that he incurred substantial costs that he would not otherwise have incurred by paying for professional representatives to assist him during the audits.

The only solution to such behavior by tax agencies is the “what’s good for the goose is good for the gander rule.” If a tax agency (or its employees) commits fraud against a taxpayer, the tax agency should be held liable. I urge California voters to rescind the blanket liability protection that tax agencies have. The actions of the FTB show it’s not warranted.

For Mr. Hyatt, the case will head back to Las Vegas for another trial (most likely next year) followed by, almost certainly, another appeal.

Hyatt Decision Due Tomorrow (Thursday)

Wednesday, September 17th, 2014

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.

Gilbert Hyatt Sues FTB & BOE Over 20+ Year Wait

Sunday, April 27th, 2014

There are delays and there are delays. Gilbert Hyatt has been waiting two years to find out how the Nevada Supreme Court would rule on the (California) Franchise Tax Board’s appeal of his $500 million award. A decision in that case could come at any time (well, on any Thursday since that’s the day of the week that the Nevada Supreme Court releases decisions). But that two year delay is nothing compared to the delay in the original matter.

For those unfamiliar with Mr. Hyatt, he invented items related to microprocessors and semiconductors. (I’m sure my brother could give a much better description of this.) Back in 1991 (yes, this case goes that far back) he moved to Las Vegas; he knew he was soon going to get a large payment and Nevada’s state income tax rate–or better put, the lack thereof–appealed to him. The Franchise Tax Board (California’s income tax agency) said he didn’t move until sometime in 2012, conveniently after he received that payment. The FTB assessed tax and penalties. Mr. Hyatt appealed those.

Mr. Hyatt also argued that he had been subject to torts in Nevada and filed a lawsuit here in Las Vegas against the FTB in 1998. He alleged that the FTB had, among other things, rummaged through his garbage, visited business partners and doctors, and shared his social security number with the media. Bill Leonard (a former member of California’s Board of Equalization) said,

This is outrageous behavior and I call on the FTB to rein in their agents. What really galled me is the FTB testified in open court that this level of harassment was only a typical audit. If true, then the stormtroopers are alive and well at the FTB.

Mr. Hyatt’s case went up to the US Supreme Court. In 2003, the Supreme Court unanimously ruled that his case could go forward. In 2008, the trial was held and the FTB lost. That’s the appeal that the Nevada Supreme Court heard in 2012.

Meanwhile, Mr. Hyatt’s audit was decided against him in 1996. If you lose at the FTB, you can appeal a case to the Board of Equalization (BOE). That’s what Mr. Hyatt did. In 2008, Mr. Hyatt thought his BOE appeal would be heard within two years. It still hasn’t been heard. So he filed another lawsuit.

He has filed a lawsuit in federal court in Sacramento accusing the FTB and BOE of depriving him of his constitutional rights. As noted in Dan Walters’ column,

“Without this court’s grant of relief that Hyatt seeks,” his suit says, “the FTB’s 20-plus-year vendetta to ‘get’ Hyatt will continue indefinitely and unabated in violation of Hyatt’s equal protection rights.”

It’s been nearly 23 years since Mr. Hyatt did (or didn’t) move out of California. It’s been 18 years since the FTB rules on his appeal and the case has been in the hands of the BOE. Yes, I’m sure California’s tax agencies have been moving with all possible speed….

Mr. Hyatt is 76. My suspicion is that the litigation between him and California’s tax agencies will last beyond his lifetime.

Gilbert Hyatt In New York

Wednesday, November 27th, 2013

The decision on the Gilbert Hyatt appeal here in Nevada has still not come out. However, when I did my weekly check I discovered that the Gilbert Hyatt case has now reached New York State.

The entire Gilbert Hyatt case revolves around when Mr. Hyatt moved from California to Nevada. Mr. Hyatt said he became a Nevada resident in September 1991; the Franchise Tax Board said he left California in April 1992. Usually, seven months don’t make much difference. Here, though, that’s not the case. Mr. Hyatt is a successful investor and received a substantial payment in late 1991 (after September).

The Franchise Tax Board (California’s state income tax agency) audited Mr. Hyatt and assessed taxes and penalties. In 1996, Mr. Hyatt protested the audit. The Protest Division did not complete its review until 2007; Mr. Hyatt then appealed the FTB’s decision to the Board of Equalization. (The BOE hears appeals from the FTB).

Meanwhile, Mr. Hyatt filed a lawsuit against the FTB in Nevada (back in 1998). Before the case was tried, the FTB asked the Nevada courts to throw out the case based on sovereign immunity. That went up to the US Supreme Court; the Supreme Court ruled unanimously that Nevada does not have to immunize the FTB for intentional torts. The case was decided in 2009, and the FTB lost. The Appeal of that was heard in May 2012, and the decision has not yet been announced. The judgment to Mr. Hyatt totals $490 million.

So what is the litigation in New York? It stems from the appeal to the BOE by Mr. Hyatt. The FTB served a subpoena duces tecum on attorneys for U.S. Philips Corporation in New York, asking for information on Mr. Hyatt’s patents, income received in 1991 and 1992, his relationship to Philips, licensing of patents, and related items; they also asked for depositions of individuals. Mr. Hyatt asked the New York court to stop the subpoenas and depositions; the FTB contended that Mr. Hyatt did not have standing to challenge the subpoenas.

At the lower court (the New York Supreme Court), the Court ruled that Mr. Hyatt did have standing, that the FTB couldn’t asks for information on a patent infringement case, but that it could ask for information related to his residency and income in 1991 and 1992 (and related items). The Supreme Court modified the subpoena duces tecum to just that information. Both Mr. Hyatt and the FTB appealed; the appellate court upheld in all respects the original order. This decision came out in March.

The New York case relates to the BOE appeal. Presumably, the subpoenas have been served and the depositions have been taken (or soon will be taken). Sometime in 2014 the actual BOE appeal would occur…only 18 years after the protest was made!

That’s the key takeaway from this post. If you fight the FTB, the FTB will delay, delay, and delay some more in the hope that you can’t afford the litigation. Mr. Hyatt has deep pockets and can afford to litigate; many (most) individual and entities fighting the FTB don’t have the deep pockets to do so.

Could Tax Accountants Have Caused California’s Revenue Surge?

Wednesday, February 20th, 2013

California budget officials couldn’t figure out where the extra $5 billion in tax revenue came from in January. As this Los Angeles Times article asks, was this an accounting anomaly? Governor Jerry Brown’s administration now believes it was a timing issue.

Many businesses increased dividend payouts and other income into last year because of federal (and California) tax hikes. Many individuals (at the urging of tax accountants like me) make their fourth quarter estimated tax payment at the end of December rather than in mid-January to lower their tax bill; state income tax paid is deductible on federal income tax. The same is true for corporations (state income tax they pay is deductible on federal income tax).

While I do believe that some of the income isn’t timing related–Californians didn’t have time to make changes to their spending habits due to the late (in the year) passage of California’s tax hike–most likely much of it is just tax revenue coming in early. And there’s still the $500 million judgment in the Gilbert Hyatt case; that decision by the Nevada Supreme Court could come at any time.

California Musings

Thursday, September 27th, 2012

Yesterday a client emailed me and asked if I was planning on moving back to California. The answer is easy: no. I could make it stronger, but I’ll let others help with that.

First, Dan Walters writes about what will happen if Governor Brown’s tax increase passes. I could just quote Alan Greenspan: “Whatever you tax, you get less of.” Mr. Walters cites the case of Gilbert Hyatt (a case I’ve written about extensively) as an example of what will likely occur if Proposition 30 passes.

Mr. Walters thinks that the verdict in the Hyatt appeal will influence this. I disagree, though; if Proposition 30 passes, the exodus will increase. It’s even easier today than it was in the 1990s to live anywhere in the U.S. and run a business. My business partner is in Maryland, yet through the magic of computers, Skype, FedEx, and the telephone we’re able to run our business very efficiently. It really doesn’t matter where you reside these days, be it Los Angeles, Las Vegas, Denver, or Phoenix.

There are some catches Californians who plan on moving need to be aware of. If you have a business entity, you probably want to reform it in your new state. That way you can escape California business taxation, too. (Note that there are exceptions to this, and this definitely should be discussed with your tax professional.)

Second, there’s a study out by the Manhattan Institute titled “The Great California Exodus: A Closer Look.” A key bit from the executive summary:

The data also reveal the motives that drive individuals and businesses to leave California. One of these, of course, is work. States with low unemployment rates, such as Texas, are drawing people from California, whose rate is above the national average. Taxation also appears to be a factor, especially as it contributes to the business climate and, in turn, jobs. Most of the destination states favored by Californians have lower taxes. States that have gained the most at California’s expense are rated as having better business climates. The data suggest that many cost drivers—taxes, regulations, the high price of housing and commercial real estate, costly electricity, union power, and high labor costs—are prompting businesses to locate outside California, thus helping to drive the exodus.

The entire report is worth your time.

Finally, there will be a court hearing in November in Sacramento on blocking California’s train to nowhere. The city of Chowchilla along with the Madera and Merced Farm Bureaus and the county of Merced have sued under California’s Environmental Quality Act. The first leg of the train, if built, will run from Bakersfield to Merced.

The California Farm Bureau Federation is upset with the high-speed rail because it would urbanize prime farmland. I’m upset with the plan because it’s a colossal waste of money. The goal of the high-speed rail project is to connect the Los Angeles and San Francisco areas by trains that would take 2:40 to run between the metropolitan areas. The high speed rail’s website lauds that its sustainable trains would help the environment.

Today, you can fly between Los Angeles and San Francisco in just over an hour. Does anyone really think that people are going to spend an extra hour and thirty minutes to take the train? As far as electricity being cleaner than a jet, that’s true…until you realize that you have to generate the electricity. That means a fossil fuel (coal, oil, natural gas), hydroelectric power, or nuclear power. The difference between “clean” electricity and a jet is that with the electricity you’re one step down from where the “green” nature goes away.

In any case, the big problem is economics. High speed rail may make sense to connect two densely packed metropolitan areas (such as from Boston to Washington, D.C.). But without massive subsidies this program–estimated to cost upwards of $67 billion–is just more money down the drain in California.

Franchise Tax Board v. Hyatt to be Argued on May 7th

Sunday, April 29th, 2012

The oral arguments in the appeal by California’s Franchise tax Board in Gilbert Hyatt’s lawsuit against the Board will be heard on May 7th in Carson City by the Nevada Supreme Court. The FTB is appealing the nearly $500 million judgment that was levied against them in February 2009. The case itself was filed in 1998, but took a circuitous path to trial in Las Vegas: It first went to the US Supreme Court as the Franchise Tax Board argued it was immune from being sued. The FTB lost that argument unanimously in 2003, and then lost the case in 2009.

The good news is that a decision in the case will likely come this summer or fall. The bad news is the oral arguments will be heard in Carson City so I can’t attend. Hopefully there will be news stories on the hearing (I’ll pass those on).

Remember Gilbert Hyatt? (An Update)

Sunday, February 19th, 2012

One of the blogs I read, How Appealing, posted a link to this story on California’s attempt to ban video games featuring “murder and mayhem” from being sold to children cost the Bronze Golden State $2 million.

That’s nothing.

There’s a case that’s still waiting to be heard at the Nevada Supreme Court that’s cost California taxpayers many millions, and has the potential to cost the state over half a billion (yes, $500,000,000). The Franchise Tax Board’s appeal of Gilbert Hyatt’s lawsuit is waiting a date to be set for oral argument. It’s been stuck in this status for over a year (the last change noted in the online tracking system for the case was on February 4, 2011). I don’t know what the average wait time is, but most likely later this year this case will be heard.

If the appeal is heard here in Las Vegas (the Nevada Supreme Court holds sessions in Carson City and Las Vegas), I plan on attending…some day (hopefully in 2012).

Gilbert Hyatt and the FTB (An Update)

Friday, February 11th, 2011

When last I reported on the Gilbert Hyatt case, Mr. Hyatt had won nearly $400,000,000 (yes, that’s $400 million) in a lawsuit from the Franchise Tax Board. This case began when Mr. Hyatt moved from California to Nevada in 1992, but the Franchise Tax Board didn’t think so. So agents of the FTB rummaged through Mr. Hyatt’s garbage in Nevada, and in the view of a Las Vegas court, committed torts against Mr. Hyatt. Including legal fees and continued interest, the tab is now around $500 million.

This case went to the US Supreme Court before it was tried; the FTB attempted to hold that California couldn’t be sued. The Supreme Court ruled against the FTB, and the case was tried in 2008…ten years after it was filed.

Not surprisingly, the FTB has appealed the decision. I’ve been trying for a while to discover the status of the case, and this evening finally found a blurb noting that the case is awaiting a date for oral arguments at the Nevada Supreme Court. [Go to page 12 of the link to see the status.] (Nevada does not have intermediate courts of appeal.) So sometime in the next year or so we’ll likely get a final verdict on how much the Golden State will be out in this case. Of course, the FTB could appeal this case to the US Supreme Court if they lose at the Nevada Supreme Court.

Meanwhile, the underlying alleged liability that triggered the whole fiasco–whether Mr. Hyatt was a California resident when he earned money off a semiconductor patent–is trickling through the California administrative hearing process.

The FTB Losing Streak Continues

Sunday, February 8th, 2009

The Franchise Tax Board’s battle against Gilbert Hyatt continues in Las Vegas. Mr. Hyatt, as you may recall, moved from California to Las Vegas in the early 1990s a few months before he received a patent settlement in the millions. The FTB conducted a residency audit and found he was still a resident of Nevada. Mr. Hyatt sued the FTB in Nevada; the FTB fought the lawsuit claiming immunity from being sued. That case went all the way to the US Supreme Court, and the Court ruled that the FTB could be sued.

Last year Mr. Hyatt finally won his case, and he won big. He won $396.08 million. Over the last week Judge Jessie Walsh denied the FTB’s motion for a new trial. She also told the FTB that they must post a bond if they wish to appeal. Somehow, Judge Walsh doesn’t think California’s credit is good. I believe (but am not certain) that a 10% bond must be posted, so that would mean about $39 million.

What is thoroughly annoying to me is that the tactics that a California resident cannot sue the FTB even if the FTB were to use the same tactics as they used against Mr. Hyatt. The FTB does enjoy sovereign immunity in California.

Further motions are scheduled to be heard on March 11th. Presumably if these motions are denied the next step is for the FTB to file an appeal.