William H. Rehnquist: We'll hear argument next in number 02-42, Franchise Tax Board of California versus Gilbert Hyatt. Mr. Leatherwood.
Felix Leatherwood: Mr. Chief Justice, may it please the Court: Respondent has prompted the Nevada courts to extend their authority over California's tax process. The Nevada court has said at Joint Appendix 138, the entire process, of FTB audits of Hyatt, including the FTB's assessment of taxes and the protests, is at issue in this case, end quote. This has been said to mean, at Joint Appendix 138, that the tax process is under attack. This lawsuit interferes with California's capacity to administer these taxes. The administration of taxes is a core, sovereign responsibility from which all functions of State Government depend on. It is protected by immunity laws of common-law tort lawsuits, like the kind presented by Respondent. California has invoked the protection of its immunity laws, but the Nevada courts have allowed respondents laws to proceed, not by extending full faith and credit. And this refusal threatens our constitutional system for cooperative federalism in violation of Article IV, Section 1 of the United States Code.
Ruth Bader Ginsburg: Mr. Leatherwood, may I ask you a threshold question? Some of your friends in this case have invited an overruling of Nevada against Hall. Of course, California was favored by that decision. Do you join in the plea to overrule Nevada v. Hall, or do you say this case is different because it involves four sovereign functions?
Felix Leatherwood: Justice Ginsberg, we do not join in the chorus to overrule Nevada v. Hall. This case is different. This case goes to footnote 24 of Nevada v. Hall. It's our feeling that Nevada v. Hall is good law in the sense it does... it does not implicate another state managing another state's core sovereign function. It's... Nevada v. Hall was strictly an automobile accident.
Stephen G. Breyer: But the comparison would be between the university, education, which was the... which was the defendant, and the tax authorities. Both of those, education and tax, seem core. Or if you're going to compare the tort itself, it would be a comparison between negligent driving, on the one hand, and going into another state and committing... you know, peering through windows, going through garbage, totally wrongly getting all the neighbors to reveal private information, et cetera. So comparing the particular acts, what's the difference, or comparing sovereign functions, what's the difference?
Felix Leatherwood: I mean, compared... I thank you, Your Honor... in comparing the sovereign functions--
Stephen G. Breyer: Education versus tax.
Felix Leatherwood: --Yeah, and driving an automobile in another state's... on another state's highway--
Stephen G. Breyer: That's not the sovereign function.
Felix Leatherwood: --That's not--
Stephen G. Breyer: I'm saying that--
Felix Leatherwood: --the sovereign function.
Stephen G. Breyer: --it seems like that's apples and oranges to me. That is, in the one case, we're looking at the acts they're complaining of, and here the plaintiff is complaining of acts that took place in Nevada that were miles outside what would be reasonable. I'm not saying he's right, but that's his complaint. In Nevada v. Hall, they were complaining about negligent driving. So what's the difference there? Or, alternatively, in Nevada v. Hall, it was a driver who worked for a university, and here it is an investigator who works for the tax board.
Felix Leatherwood: Well, to answer the Court's question directly, the most significant difference is that the tax function is... is much more significant than the education function.
Anthony M. Kennedy: Well, that's... that... that... that would be a very difficult premise for us to say, that education is somehow secondary.
Felix Leatherwood: Well--
Anthony M. Kennedy: You're... you're saying Nevada can't have a great university... can have a great university by keeping its people within its own borders. They can't go to California to get information to solicit, to recruit students? That... that would be a very difficult decision for us to write on that premise.
Felix Leatherwood: --No, Your Honor, I would agree with you that that would be a difficult--
Anthony M. Kennedy: For the State of California to argue that education is not a core state function is, to me, rather astounding.
Felix Leatherwood: --No, Your Honor, I'm not arguing that education is not a core sovereign function. What I'm arguing is that taxation is an essential core sovereign function since that education cannot move forward--
Ruth Bader Ginsburg: Well, Mr.--
Felix Leatherwood: --to provide taxation.
Sandra Day O'Connor: --Leatherwood, we... this court tried to follow a core state function test under the Tenth Amendment. And in Garcia, kind of gave it up, didn't it, as being an unworkable thing. Now, why would we want to resurrect that here? And why is it that you don't say, well, if the Court wants to overrule Nevada v. Hall, that's fine; I'll win. I mean, I don't understand your position. You're asking us to go back to a test that we rejected under the Tenth Amendment in Garcia, but you don't want to say, sure, if you want to overrule Nevada v. Hall, be my guest.
Felix Leatherwood: Yes, Your Honor. Justice O'Connor, what we are attempting to say here is that this case is more analogous to this court's jurisprudence in the area of the Federal Tax Injunction Act along the line of fair assessment... the fair assessment cases, where the court has directed that the Federal Government will back off on trying to manage state taxes.
William H. Rehnquist: There you have a specific act of Congress that tells the Federal Government to back off. And I don't believe you have any such thing here.
Felix Leatherwood: But we do have the Full Faith and Credit Clause, which directs that a state is to recognize the public acts of another state. And we do have an immunity law applicable here, and this directs that Nevada should respect the immunity laws of the State of California. And the immunity law, in this particular instance, provide absolute immunity for conduct as undertaken in a... in a tax audit. Anything that's associated with tax audit, is protected.
William H. Rehnquist: But Nevada did recognize California law to the extent it was similar to Nevada's... that is, saying you had immunity from the negligent acts. And then it went on to say, no, you don't have immunity from intentional acts, even though California law does give immunity from intentional acts. But surely you wouldn't go to the extreme that you would say someone could come over to Las Vegas from California and just beat up somebody because they haven't paid their taxes, would they?
Felix Leatherwood: Absolutely, I agree with the Court on that point. The--
Anthony M. Kennedy: Why not?
Felix Leatherwood: --the extension of that--
Anthony M. Kennedy: Why do you agree on that point? I don't understand that?
Felix Leatherwood: --Because the extension of our immunity law does not cover physical torts or torts--
Anthony M. Kennedy: Oh.
Felix Leatherwood: --outside the scope--
John Paul Stevens: I see.
Felix Leatherwood: --of course, the scope of... of the... the acts that are incidental to--
John Paul Stevens: I see. So under California law, there would be... that would be actionable; whereas, under Nevada law, here, what they're doing is actionable. You just want to use the California standard rather... rather than the Nevada standard.
Felix Leatherwood: --Well, in fact, Your Honor, if they would use the Nevada standard, use the same standard that Nevada applies to its own taxing agencies, then this case would be on a hold. What Nevada has done in this particular case is that it has gone outside its own precedent and applied a different standard to California taxing agencies, and it's not--
Ruth Bader Ginsburg: But that's not what they're... the Nevada court said, we're going to treat the tax collectors from anywhere who come in to our state and act here, and we're going to... the Nevada Supreme Court said, we're going to apply our rule, and our rule is negligence is immunity; intentional, there isn't. So you're asking us to discredit or disbelieve the Nevada Supreme Court when it said, the law we apply to tax collectors who act in this state is the same as we apply to Nevada tax collectors.
Felix Leatherwood: --Your Honor, I am not asking this Court to not believe the Nevada Supreme Court. But what I'm saying is that Nevada has published precedent, as recent as 1989, where it requires that a taxpayer forego bringing a lawsuit until they... until there has been... until there's a resolution of all statutory procedures.
Ruth Bader Ginsburg: Oh, but this... but Nevada Supreme Court, I thought, made very clear that what they were dealing with is tortious conduct, harassing conduct. They, in fact, refused... Nevada Supreme Court refused to decide where this man was domiciled, because that would interfere with the ongoing procedure in California on the tax liability. I thought that the Nevada Supreme Court had made it clear that they were dealing with the way their resident is being harassed and not with where he was domiciled on a magic date.
Felix Leatherwood: Your Honor, what has happened in this particular case, 97 percent of the conduct that occurred during the course of this audit occurred in California. And, quite naturally, what Nevada is... what Nevada is doing is permitting Mr. Hyatt to go behind the actual tort and make a collateral attack on the tax itself.
David H. Souter: Well, that may be, but the that isn't the issue that we've got in front of us here. I mean, the question in front of us is not how far can the Nevada courts go in reviewing California's tax practice. The issue before us is, among others, in a claim of tort against your... your operative in Nevada, for the manner in which the tax is collected is their absolute immunity. And, you know, maybe the Nevada courts are going too far in discovery, but that's not the issue in front of us.
Felix Leatherwood: I would absolutely agree with the Court that the issue whether or not Nevada was obligated to apply our immunity laws with respect--
David H. Souter: All right.
Felix Leatherwood: --with respect to conduct undertaken incidental to this audit.
David H. Souter: May I go back to Justice Stevens' question, because I'm not sure of your answer to it. What if the State of California passed a statute tomorrow morning saying the use of thumbscrews in tax collection is authorized? Is... would your answer to Justice Stevens' question be that... or wouldn't your answer to Justice Stevens' question be that if you went into Nevada and you used thumbscrews, you would be entitled, on your theory, to absolute immunity? Isn't that correct?
Felix Leatherwood: Your Honor, no. What I'm saying is that, under that particular theory, I do not think that you could pass law in the State of California that will essentially sanction a crime, and there was no crimes committed within the course of this audit. If the... if an auditor commits an intentional tort, such as a burglary or a trespass in Nevada or in California, it's... it's our position that that particular conduct is not incidental to--
Stephen G. Breyer: It doesn't matter. I mean, we're trying to get the... we're trying to get the analysis of it, and I'm having exactly the same problem. Imagine that, you know, California did say there is absolute immunity, even if you beat somebody up, absolute tort immunity. Okay? Even for beating people up. Now, suppose they did have that; you could prosecute it as a crime. Now you're in Nevada, and they say, the plaintiff, he beat me up, he came across the state line, down from Lake Tahoe. He was in a bad mood, lost too much money at the casino, and he beat me up. All right? Now, can Nevada bring that lawsuit or not? That's, I think, what Justice Stevens' question was.
Felix Leatherwood: --Well... well, I understand that, Your Honor. My position is that even though that law does not exist in California--
Stephen G. Breyer: Yes.
Felix Leatherwood: --but applying--
Stephen G. Breyer: If it did.
Felix Leatherwood: --applying it... my... our particular theory--
Stephen G. Breyer: Yes.
Felix Leatherwood: --that, yes, we... then Nevada would be obligated under the Full Faith and Credit Clause to apply that particular law. But--
Stephen G. Breyer: And, therefore, you could not bring the lawsuit in Nevada about somebody beating somebody up.
Felix Leatherwood: --If--
Stephen G. Breyer: If that were the law in California.
Felix Leatherwood: --if that were... if that was the case. But--
Stephen G. Breyer: Yeah, okay.
Felix Leatherwood: --in this particular case, that's illegal in California and that's illegal in Nevada.
Stephen G. Breyer: So how, then, do we reconcile that position, where we're back to our starting place, with the fact that he could bring an action if on his way down from Lake Tahoe in the state car, he happened to drive a little negligently and ran somebody over? I mean, that's Nevada v. Hall, just reverse the states.
Felix Leatherwood: No, and we're agreeing with Nevada v. Hall.
Stephen G. Breyer: I know. So this is why we're having a problem. It's clear that if our tax collector, on his way down from Lake Tahoe, runs over a Nevada resident, the Nevada resident can sue and apply Nevada law.
Felix Leatherwood: Yes, I--
Stephen G. Breyer: You say, if, in fact, that same tax collector beats up somebody, and the California law is that you cannot sue, Nevada cannot apply its own law.
Felix Leatherwood: --That's not what I'm saying, Your Honor. I'm saying if that conduct... if that conduct is connected to the actual audit itself, then it's protected. But what I'm saying, I cannot possibly see, under any possible theory, that a beating, that it... that breaking into someone's house could actually be part of the assessment... tax assessment process. If an auditor engages in that kind of behavior, the auditor is not covered under the absolute immunity. That is outside the scope of that--
William H. Rehnquist: Okay.
Felix Leatherwood: --of that statute.
Stephen G. Breyer: I.
David H. Souter: And is the reason that the answer is different in the two cases, the reason that there is something special about tax collection or is the reason that there is a closer connection in the hypo of the beating up for tax collection than the driving the automobile for tax collection?
Felix Leatherwood: Well--
David H. Souter: Which is it? Is it the nature of the tax collection or the nature of the activity which leads to the tort liability?
Felix Leatherwood: --Well, I think it's both, Your Honor. Well, first of all, tax... tax collection, by definition, is an intrusion of someone's life. The allegations alleged here are principally invasion of privacy, disclosure of information, that sort of thing. Ninety-seven percent of that conduct occurred in California. You cannot possibly investigate or prosecute Mr. Hyatt's case without intruding into that tax--
John Paul Stevens: Mr. Leatherwood, if I understand your position, it would be exactly the same if a hundred percent of the conduct had occurred in Nevada.
Felix Leatherwood: --Absolutely, Your Honor. That... but... but--
John Paul Stevens: But the problem I have... may I just ask this question. Assume there is a... there's a difference between Nevada law and California law, as I understand it. Some things are actionable against a tax people in one state and not the other. Why is it, in your view, that if the same conduct had occurred six months later, but by Nevada tax collectors instead of by California tax collectors, because he's been in both states and probably is subject to tax in both, Nevada would allow the suit against its own tax people but now allow it against the California tax people? Why does that make sense?
Felix Leatherwood: --Well, Your Honor, in this particular case, as I've indicated, according to our reading of Nevada precedent, published precedent, that they would not permit this lawsuit to proceed until the tax process has been concluded. With respect to... to directly answer your question, it does not appear that Nevada would prosecute its own... it will permit a prosecution of its own agents in the case where the allegations are principally that there is an intrusion into Mr. Hyatt's life or that there--
John Paul Stevens: Well, we understood the reasoning of the Nevada Supreme Court to say they would. I think... I must have misread the opinion. Is that--
Felix Leatherwood: --No, absolutely not, Your Honor. I don't think you misread the opinion. What I think the Nevada Supreme Court said is that they will permit intentional tort prosecution of government employees. This case does not involve a government employee. This case involves a government agency itself, a tax agency. And under Nevada law, you cannot proceed against the Nevada tax agency without first exhausting your administrative and statutory remedies to contest the underlying tax itself.
William H. Rehnquist: --But certainly this sort of thing isn't the kind of thing you could have exhausted your remedies on, is it?
Felix Leatherwood: Absolutely, Your Honor. In our... in our... it is our position that this entire... the entire lawsuit is linked up to our tax process, because the conduct that the Respondent is complaining about here is that the tax itself is... the tax itself and the tax process is engaged in bad faith. And I would--
David H. Souter: Now, what is... was your answer to the question? Suppose that this tax collector were driving negligently in Nevada--
Felix Leatherwood: --Part--
David H. Souter: --Suppose the tax collector were driving negligently in Las Vegas. It's very important for the tax collector to go examine the record, and he's driving negligently. What--
Felix Leatherwood: --I think, under Nevada v. Hall, he would be... he would be subject to negligent liability. It's not connected to a core silent function because the function here is... the function here is a tax investigation, whereas, driving is something that you can investigate independent of the tax process itself.
David H. Souter: --So suppose that we... we conclude that footnote 24 does not provide sufficient guidance for us to have a stable jurisprudence and that you will lose unless Nevada versus Hall is overruled. Would you then ask us to overrule Nevada versus Hall?
Felix Leatherwood: Your Honor--
David H. Souter: I know you don't want to entertain that possibility, but suppose that's what we conclude.
Felix Leatherwood: --Well, we... we've thought about this, Your Honor, of course, and we would accept a win, if that's the Court's direction, through overruling Nevada v. Hall, but it's our contention that the Court doesn't have to go that far to get... to get to this point. The Court can literally analogize to the special protections that are provided to state tax systems within the federal system itself.
William H. Rehnquist: But then that, as I suggested earlier, is a difficult thing to do, because there are congressional statutes that mandate that here. And all we have is the Full Faith and Credit Clause. Now, perhaps you say that's sufficient, but isn't it possible that there might be other emanations of the Full Faith and Credit Clause, other than just footnote 24, or whatever it is, in Nevada against Hall. I'm not talking about overruling it, but developing it, perhaps.
Felix Leatherwood: Yes, Your Honor. I would agree with that. Of course, we think that Nevada's failure to recognize or give dignity to California's immunity statute is not only a violation of the Full Faith and Credit Clause, but is a hostile act, and this kind of hostility is contrary to our whole concept of--
Stephen G. Breyer: What... what about a congressional statute? That is, suppose the opinion read... what would your objection... I know you'll object to this possible opinion, and I want to hear what your objection is... the opinion says they're complaining here, as far as we're concerned, with a serious tort, invasion of privacy, you know, a whole lot of really bad behavior, et cetera... they're complaining about that taking place by a California official in Nevada, and we can't really distinguish that from the automobile accident taking place in Nevada. They're both torts. They're both very bad... you know, this is worse conduct. Now, it's true that our investigation of this may interfere with California's tax authority's ability to sort of run investigations in general. But if that turns out to be a problem, a big problem, Congress can legislate.
Felix Leatherwood: --Well, that still creates... that still creates the situation where Nevada is supervising and managing California's tax practices.
William H. Rehnquist: Back to activities happening in Nevada.
Felix Leatherwood: Yeah. In this lawsuit... this lawsuit is... is being prosecuted... is being investigated almost exclusively in California. The... the intrusion here, the interference here, is that Nevada has permitted Mr. Hyatt to use this lawsuit both as a... as a wall and a battering ram. It has almost suppressed the entire California tax investigation. It's creating an entire class of possible plaintiffs that can sue California just for literally going across the state line and making an inquiry as to whether or not a former California resident, a former California taxpayer, actually owes any taxes.
William H. Rehnquist: Well, they would have to show as an intentional... whatever that means under Nevada law... not just negligent when they--
Felix Leatherwood: Well, the intentional act here is that California created a tax system in bad faith to... bad faith to extort an exit... an exit tax from... from a taxpayer.
Ruth Bader Ginsburg: --I thought that, again, the Nevada Supreme Court said, we are not going to touch the question of where this man was domiciled. That's for California to decide. What we are dealing with is this new thing. One allegation was trespass and going through the man's trash, and another was calling... maybe the calls emanated in California... calling people in Nevada insinuating bad things about this person. And that has nothing to do with where the man is domiciled. It's a question that California is deciding and Nevada says it won't touch.
Felix Leatherwood: Yeah, and I would... I would direct the Court to Joint Appendix 133, where... where the Court would... the Nevada courts have indicated that almost all the action in this... in this lawsuit occurred in California. And--
Ruth Bader Ginsburg: Well, you... you recognized that there were two trips into California.
Felix Leatherwood: --Actually, Your Honor--
Ruth Bader Ginsburg: I mean, to Nevada.
Felix Leatherwood: --Actually, Your Honor, I believe there were three trips, and they were short trips... they were trips of extremely short duration.
Ruth Bader Ginsburg: And what was there about... on one of those trips, there was a trespass on his property and rummaging through his trash.
Felix Leatherwood: Well, that's not part of... that's not part of the allegations of the... of the complaint itself. The complaint is saying that--
Ruth Bader Ginsburg: It was a more... a more general interference with his privacy, but those were examples that were alleged, if not in the complaint, somewhere.
Felix Leatherwood: --No, there has been deposition testimony that there... on one of the trips, that the investigator looked at the timing of Mr.... of Respondent's trash delivery and also looked at... determined whether or not Respondent was receiving any mail at that particular location. That does not justify the pervasive nature and the extent in which this lawsuit has reached into California and literally attacked the tax process. And, once again, I will refer the Court to the Joint Appendix at page 60, where it is alleged that the California tax system itself is a... is a fraud... that is, put together in bad faith for the specific purpose of extorting an exit tax from former residents who... as they leave California. Well, if the Court has no more questions in this regard, I would like--
William H. Rehnquist: Do you want to reserve your time, Mr. Leatherwood?
Felix Leatherwood: --reserve the balance of my time, thank you.
William H. Rehnquist: Very well. Mr. Farr, we'll hear from you.
H. Bartow Farr, III: Thank you, Mr. Chief Justice, and may it please the Court: In our federal system, it's recognized that the states will sometimes have overlapping jurisdiction. When that happens, the Constitution allows each state to apply its own laws against the background principle of comity where they believe it would be appropriate to defer to the laws of another state. And I submit that the Nevada courts here have applied these principles very carefully. Nevada, of course, correctly held that they were not required to apply California's legislative-created law of immunity. At the same time, however, they have applied principles of comity to strike out the declaratory judgment count that would have gone to the very issue that is being contested in the Florida... excuse me... in the California tax proceeding, which is the date that Mr. Hyatt moved to Nevada. And they have also given California complete immunity for any negligence that it has committed. So in this case, it seems to me, the system is working--
John Paul Stevens: Mr. Farr, can I ask you, do you think they were compelled by the Full Faith and Credit Clause to grant immunity on the negligence claim?
H. Bartow Farr, III: --That's an interesting question, Justice Stevens, because Nevada officials themselves have immunity. There would be a question, I suppose, of whether the Full Faith and Credit Clause requires that. My general feeling is probably not, but that is really not a question so much of whether... a choice of law between California law and Nevada law, but simply a question of what Nevada law would apply. So I don't think that the Full Faith and Credit Clause itself speaks to that issue, but I do think principles of comity will traditionally reach that result. And, in fact--
Anthony M. Kennedy: Well, are principles of comity dictated by the Constitution? Suppose--
H. Bartow Farr, III: --They are--
Anthony M. Kennedy: --suppose Nevada said they were not going to grant comity?
H. Bartow Farr, III: --That's correct, yes. And I don't think there is a federally enforceable law of state comity, but I think that is the system that has existed essentially between sovereigns for much longer than the United States is--
Anthony M. Kennedy: Well, is it your position then the private plaintiff can always bring suit against a state in the courts of another state?
H. Bartow Farr, III: --Well, the first question, of course, is whether the court has legislative... the first Full Faith and Credit question is whether the court in which the suit is brought has legislative jurisdiction. So there is a requirement that that state have constitutionally sufficient contacts with the law--
Anthony M. Kennedy: Well, then under due precedent. Well, that's easy to satisfy.
H. Bartow Farr, III: --So assuming that they've satisfied that, they are entitled to bring a suit. Then the question is whether the state... and I... and I believe at that point the state is free to apply its own laws to protect its own interests. I think that's what the Full Faith and Credit Clause allows. And it is the doctrine of comity that provides the acknowledgment of the state... the other state's interests. And that's typically, in fact, what's happened with Nevada--
William H. Rehnquist: It's very--
H. Bartow Farr, III: --versus--
Anthony M. Kennedy: --it's very odd to me that California can't be sued in its own courts and it can't be sued in a federal court, but it can be sued in a Nevada court, which, if we follow that, the question really is has the... has the least interest in maintaining the dignity of the State of California.
H. Bartow Farr, III: --Well, there are two... two factors there, Justice Kennedy. First of all, there is the fact that Nevada has some very real interests of its own, its own sovereign interests to protect here. I mean, there have been torts which were both committed in Nevada and directed at a Nevada resident. So, to begin with, before one gets to the immunity question, Nevada, as a sovereign state, has important interests in assuring compensation and also in deterring that kind of conduct. So the idea that a legislatively created immunity by another state should be able to prevent Nevada from protecting those interests seems inconsistent with the federal system. Now, if one goes beyond that to the question of inherent immunity, the very idea that a state should have to be subject to sue in the courts of another state, I think, first of all, as you know, we don't believe that issue is properly presented on the question presented in this case. But if you would like me to address it just for a moment, I think there... there are differences if one looks to the... to the way that the... essentially immunity has been resolved in... in the course of... of the United States. First of all, in its own courts, it has the common-law immunity based on the idea that it is both the king being sued in its own court, and also typically it is also the progenitor of the law, so to speak, to Justice Holmes' point. In the United States, there's... the courts of the United States, there's a very specific situation. At the time of the convention, the states were, obviously, forming a new sovereign, and the question of whether that sovereign was going to grant them the immunity they had in their own courts or whether that sovereign would be in the same position essentially as foreign sovereigns typically were, which is that they did not have to provide sovereignty except as a matter of comity. That's The Schooner Exchange opinion. But... so the states, at that point, had a very real interest in deciding that question, and they did, in fact, decide that question, as the court has recognized. That is not true with respect to the immunity that they have had in the courts of other states.
Stephen G. Breyer: Is... how does Alden fit into this? In Alden, I take it the court now... we've held that a citizen of Maine suing in the State of Maine's courts alleging that Maine had violated a federal law can't do it. Sovereign immunity. Right? That's Alden. All right. Suppose the citizen of Maine walks into a New Hampshire court and brings the same lawsuit against Maine, assuming New Hampshire has appropriate jurisdiction under its own laws.
H. Bartow Farr, III: Uh-huh.
Stephen G. Breyer: Do we get a different result?
H. Bartow Farr, III: Okay, I think that is not a question that is within the notion of what is the question in this case.
Stephen G. Breyer: No, no, well--
H. Bartow Farr, III: I'm sorry. I--
Stephen G. Breyer: --you see, what I--
H. Bartow Farr, III: --Excuse me.
Stephen G. Breyer: --nonetheless, although--
H. Bartow Farr, III: No, I--
Stephen G. Breyer: --what I'm trying to do is... is sort out what, in my mind, are a set of impossible anomalies, and that's why I ask you that question.
H. Bartow Farr, III: --I'm sorry. I started to answer in the wrong way.
Stephen G. Breyer: Go ahead.
H. Bartow Farr, III: What I... I reserve the point, of course, always, that I don't believe this is within the question presented.
Stephen G. Breyer: Yeah, yeah, of course.
H. Bartow Farr, III: But I actually was going... what I meant to say is that I don't think it's the same kind of question in the sense that I think still when you're talking about enforcement of a federal cause of action in another state, that is still really a federal-state question.
Stephen G. Breyer: See, but--
H. Bartow Farr, III: That's still--
Stephen G. Breyer: --your answer, then--
H. Bartow Farr, III: --an evolving question.
Stephen G. Breyer: --your answer to my question is Alden cannot be avoided simply by the Maine citizen walking into a New Hampshire court and bringing the same case.
H. Bartow Farr, III: That's correct.
Stephen G. Breyer: All right.
H. Bartow Farr, III: I think that is--
Stephen G. Breyer: And I would guess that's right.
H. Bartow Farr, III: --still a federal-state--
Stephen G. Breyer: All right, assuming that's right--
H. Bartow Farr, III: --I think that is still a federal-state issue.
Stephen G. Breyer: --assuming that's right, now, look at the tremendous anomaly, which you were just about to address, and I want to be sure you do. Our citizen of Maine walks into the New Hampshire court and sues the State of Maine under federal law. And the answer is, he can't do it because of sovereign immunity. Our citizen of Maine does the same thing, but this time his cause of action is state law. And now you say he can do it.
H. Bartow Farr, III: That's right. And--
Stephen G. Breyer: And the only difference between the two cases is that his cause of action is federal law in the first case, and he can't sue the state; but state law in the second case, and he can, which, of course, means that the law of New Hampshire binds Maine in a way that federal law cannot. Now, that, to me, I just can't... that, to me, seems so anomalous that... that I'd like an explanation--
H. Bartow Farr, III: --Well--
Stephen G. Breyer: --if you can give it. And you see how I'm thinking of it as connected here, because the facts here are just part of that general anomaly.
H. Bartow Farr, III: --That's correct. Actually, Justice Breyer, I think that's something that the court, to some extent, addressed in Alden itself--
Stephen G. Breyer: Uh-huh.
H. Bartow Farr, III: --in distinguishing the opinion in Nevada versus Hall, when it noted that when you get into the situation of a state being sued in the courts of another state and, as in Nevada versus Hall, under a state cause of action, you have now implicated the sovereignty of a second sovereign. So when one is now looking at the... at the issues of sovereign immunity, one is looking at a different platform of issues and also at a different historical base.
Anthony M. Kennedy: But that seems to make their case even harder. It would be difficult to conceive that the framers thought that Virginia could be sued in Pennsylvania but not in the federal court. I would think that the presumption would be that this was an even stronger case for the exercise of sovereign immunity than when all of the citizens of the union are involved as in the Alden situation--
H. Bartow Farr, III: Well, I think that--
Anthony M. Kennedy: --in the Eleventh Amendment.
H. Bartow Farr, III: --I mean, I think that there are two things going on. I mean, first of all, the question is not whether they can be sued, but if not, why not. For example, with Pennsylvania and Virginia, as I'm sure the Court is aware, had a... Nathan versus Virginia is a case in which that very situation came up. But in the courts of Pennsylvania, the Pennsylvania Attorney General urged its own courts to recognize sovereign immunity. So that could naturally fit within the idea that Schooner Exchange had made clear, which is that when you're talking about coequal sovereigns of that nature, one is talking about sovereignty that... excuse me, immunity that is extended as a matter of comity, not as a matter of absolute right of the other sovereign. And the reason is... excuse me... the reason is that if you don't allow the sovereign to execute its own laws within its own territory, you're depriving that sovereign of part of its sovereignty.
William H. Rehnquist: Well, doesn't our original jurisdiction as the states between states bear something on this question?
H. Bartow Farr, III: It bears a little bit. But, of course, Article III itself is not a exclusive jurisdiction provision. The Section 1251 provides exclusive jurisdiction with respect to suits between states.
William H. Rehnquist: The idea that the framers would provide for its original jurisdiction in the Supreme Court in... for suits by one state against another suggests they thought it might be pretty hard to bring such a suit anywhere else.
H. Bartow Farr, III: Well, and they... certainly as a practical matter, they would have been right, Mr. Chief Justice. I mean, as a practical matter, it has always been difficult to bring a suit against a state, either in its own courts or in the courts of another state. I mean, even since Nevada versus Hall, typically states have granted immunity to other states for when they're sued in their own courts. And if they haven't granted absolute immunity, what they have done, which I think is an important principle emerging... emerging principle of comity, is they have tended to look at their own immunity to see what kinds of suits could be brought against them and to try, then, to grant to the... to the outside sovereign that same type of immunity.
Sandra Day O'Connor: Mr. Farr, have you found other examples around the country of suits by citizens of one state against another state in the other state's courts?
H. Bartow Farr, III: I--
Sandra Day O'Connor: Is this relatively rare, or is it happening? And in what context is it happening?
H. Bartow Farr, III: --It's relatively rare, and... but there have been some suits. There are a few of them cited in our red brief, if I can find the page number, pages 38 and 39. The... there are suits, for example, negligence suits involving the release of dangerous persons within another state who have created injury to citizens--
Sandra Day O'Connor: Uh-huh.
H. Bartow Farr, III: --of that state. There are more commercial-type things involving contracts or... one, in particular, is a it for invasion of privacy when someone who wrote a book disclosed information. In general, though, Justice O'Connor, as I say, some of those suits, the courts have just said, we're not going to hear them whether you have a valid cause of action or not. We're simply not going to... going to recognize that in our courts because of the sovereignty of the defendant. Other courts have said, yes, we will open our courts, but we are going to look to our own immunity to try to have essentially a baseline to measure the sort of immunity that we are going to--
Ruth Bader Ginsburg: Mr. Farr, are you saying--
H. Bartow Farr, III: --accept.
Ruth Bader Ginsburg: --that that, too, is just a matter of comity?
H. Bartow Farr, III: I do think that that's--
Ruth Bader Ginsburg: Doesn't--
H. Bartow Farr, III: --just a matter--
Ruth Bader Ginsburg: --doesn't the Privileges and Immunity Clause of Article IV have something to say? If you can treat a tax collector from California differently than the tax collector in Nevada, you're not giving their tax collectors equal privileges and immunities in Nevada.
H. Bartow Farr, III: --If one granted lesser immunity? Is that the question--
Ruth Bader Ginsburg: Yes. If one... you said that the only stopper was a notion of comity, and I'm suggesting that you might not be able to treat two officials, one from out of state, one from in state, to treat... to favor the in-state official. But maybe Privileges and Immunities have... has something to do with that.
H. Bartow Farr, III: --If a state is entitled as a defendant to invoke Privileges and Immunities against the courts in another state, I would think that's right. Certainly in the case--
David H. Souter: Is it?
H. Bartow Farr, III: --I--
David H. Souter: I mean, I thought--
H. Bartow Farr, III: --I would have thought not.
David H. Souter: --that would go to individual liability, but it would... it would not affect this question, but I may be wrong.
H. Bartow Farr, III: Well, no, I... that would be my assumption, also, Justice Souter. I think that the... the Privileges and Immunities and Equal Protection are... are provisions that apply to individuals who are claiming discrimination in... in another state. I don't think they would apply directly to a state. But, as I say, the... the notion that comity is... is something that... that doesn't have a force, even though it's not federal enforceable, it seems to me is a little bit of a misperception. Because, again, if one goes back to the notion of the law of nations or separate sovereigns, comity essentially has been the provision that governs their relations since well before the convention.
Anthony M. Kennedy: Well, there is some reluctance to say that California officials can run amok in Nevada without Nevada being able to do anything about it. I suppose if it were a pervasive practice, Nevada might be able to sue California in the original jurisdiction under some parens patriae theory. I'm not sure about that.
H. Bartow Farr, III: Well, I mean, let me suggest a couple of other possibilities, Justice Kennedy, as well. I don't... I don't know whether the court would take original jurisdiction of that question or not, but, I mean, the most direct example of something states could do, obviously, is they could reach agreements between themselves. I mean, there have been two cases before this court involving suits against states in the courts of other states. One was Nevada in California's courts. This is California in Nevada's courts. If those states, who are neighboring states, feel that this is an issue that they need to address, they could reach some sort of agreement and, therefore, have reciprocal legislation. And, for example, under the Full Faith and Credit Clause for years, as the Court may know, there is a doctrine that said that states didn't have to enforce the penal laws of another state, even though Full Faith and Credit, on its face, would make you feel that maybe they would have. But, in fact, states eventually began, through reciprocal agreements in decisions, and I think in legislation also, saying, you know, we essentially will enforce the penal laws and the tax laws of other states, so long as they do for us. So, again, the states--
William H. Rehnquist: Penal laws or penal judgments?
H. Bartow Farr, III: --No, no, penal judgments, the court said in... in Milwaukee County, have to be enforced, but they... they distinguished at that point, Mr. Chief Justice, the idea that a law itself would have to be in force before it had been reduced to--
Stephen G. Breyer: Right, but what... what... what is the... I don't want to... I don't want you to get distracted, because I thought Justice Ginsberg and maybe Justice Kennedy and I were driving at the same problem, which is that imagine Nevada v. Hall is good law. All right, now, the question comes up, How do you prevent Nevada from going wild? All right. And so now we have several answers: (a), Congress can pass a statute--
H. Bartow Farr, III: --Correct.
Stephen G. Breyer: --(b) interstate compacts... that was what you were suggesting.
H. Bartow Farr, III: And... and--
Stephen G. Breyer: All right.
H. Bartow Farr, III: --if I may--
Stephen G. Breyer: Yeah, the--
H. Bartow Farr, III: --if I may intercede, it doesn't necessarily have to be a compact. I'm not sure--
Stephen G. Breyer: --Right, some--
H. Bartow Farr, III: --it's agreements that have to be proven.
Stephen G. Breyer: --kind of a voluntary action by the states.
H. Bartow Farr, III: Right, correct.
Stephen G. Breyer: (c) Privileges and Immunities, which has the problem that it refers to citizens and not states, (d) equal protection doesn't work, I don't think, because it says, again, citizens. A due process clause, is a state a person under the Due Process Clause? (e), what's (e)? I mean, you see? If Nevada... (e) is, of course, footnote 24, but then that gets us into the National League of Cities problem. And so National League of Cities--
H. Bartow Farr, III: Well, there could--
Stephen G. Breyer: --that... that... that approach... equal... no, Privileges and Immunities, due process of law, voluntary action states, Congress enacts a law, anything else? Have we got... is that the exhaustive list that we must choose from?
H. Bartow Farr, III: --It's--
Stephen G. Breyer: Or--
H. Bartow Farr, III: --it seems exhaustive--
Stephen G. Breyer: --And the only... all right, that's... if... if nothing in that list works, then the only alternative is overrule Nevada v. Hall.
David H. Souter: Is--
Stephen G. Breyer: --or, excuse me--
David H. Souter: --is comity on the list?
H. Bartow Farr, III: --Well, comity--
David H. Souter: Well, I mean... I mean I--
H. Bartow Farr, III: --excuse me... comity is--
Stephen G. Breyer: --Comity... comity is not the answer to the problem, because... well, it is, in a sense. It is, in a sense.
H. Bartow Farr, III: --Yeah, I mean--
Stephen G. Breyer: Voluntary restraint.
H. Bartow Farr, III: --Excuse me. I don't... I certainly don't mean to minimize the theoretical possibility that suits in courts of one state could ultimately prove to be a problem, generally. What I'm suggesting is that there is nothing, first of all, in the history of the Full Faith and Credit Clause that would suggest that once a state has proper legislative jurisdiction, as I think everybody concedes that Nevada does here, that somehow that clause was intended to displace the law of that state simply because another state had made different policy choices about, let's say, here, compensation and immunity.
William H. Rehnquist: But can you say that categorically and absolutely? I mean, there are all sorts of permutations of facts that could up.
H. Bartow Farr, III: Well, what... the permutations and facts, I think, go particularly to what constitutes legislative jurisdiction. So perhaps in that sense, my statement is broader, or seems broader in the context of this case than I mean it to be. But I do... but I do think, in general, that I don't see any warrant in the Full Faith and Credit Clause, given the fact that it was enacted with very little debate, and almost all of the debate was about judgments and not about enforcement of other states' laws, I think it would be stretching the clause beyond recognition to say that at some point it was... it was telling states, you're going to have to set your laws aside and apply the laws of another state.
William H. Rehnquist: There was a time in the '30s and '20s when this court came pretty close to that, the cases that preceded Pacific Employers.
H. Bartow Farr, III: That's correct, Mr. Chief Justice.
Ruth Bader Ginsburg: Clapper and Bradford.
William H. Rehnquist: THE COURT Yes.
H. Bartow Farr, III: That's correct. And as I think my argument might suggest, I think the Court was correct to essentially back away from that kind of balancing test and essentially go back to the principle of saying when a state is competent to legislate, then it may apply its own laws, leaving the additional questions about what might happen at that point to questions comity where a state is the defendant. And, as I've suggested, Nevada courts have shown considerable comity already here, and the case, of course, is not yet concluded.
William H. Rehnquist: Comity is something like a hearty handshake. I mean, it... it's something that you can't put any... any force to.
H. Bartow Farr, III: That's... that's true in one sense, Mr. Chief Justice. I mean, when I say it's not... that there's no federally enforceable state law of comity, I... that's true. But at the same time, I mean, the court's decisions about comity since back in the last 18th century have emphasized that it is a serious doctrine. It's a doctrine built of respect for... for other sovereigns. And in particular... and I think this... this is... also goes to the practical problem that Justices Kennedy and Breyer are asking about... it also does have a healthy measure of self interest in it. I mean, when... when you are talking about coequal sovereigns, any sovereign that is exercising jurisdiction over another sovereign understands that that's... the first sovereign... or the second sovereign has the same power and authority over it.
Sandra Day O'Connor: Is... is the question of comity one that has a federal component so that this court should weigh in on when it has to be exercised?
H. Bartow Farr, III: I don't believe so state versus state, Justice O'Connor. Or course, in the... in the types of cases that the board was referring to this morning, like McNary, there are comity elements. And there... and there is a jurisprudence of this court with respect to federal and state relations which does depend on comity, and that is, of course, federally enforceable. I don't believe that there is a concomitant enforceable doctrine--
John Paul Stevens: But you're arguing--
H. Bartow Farr, III: --state to state.
Sandra Day O'Connor: --Even in the face... even in the face of some development by state... a state court that seems totally out of whack with our constitutional structure?
H. Bartow Farr, III: Well, Justice O'Connor, I suppose I should--
Sandra Day O'Connor: Are there no extremes? Is there no limitation?
H. Bartow Farr, III: --Well, I... I mean, I'm... I suppose I should pause in the sense that... that if there is something that is so threatening to the constitutional structure and something for which there is no historical basis in... in terms of the... the way that sovereigns deal with each other. Now, see, that's... that's where I think this case is very different, because even though there was certainly a practical tradition that states were not to be sued in other states, as I say, since Schooner Exchange, and, indeed, in the Verlinden in 1980, this court has always taken the position that when you're talking about relationships between sovereigns, and they're coequal sovereigns, and the issue is immunity between them, that is a matter of comity.
Stephen G. Breyer: All right, but leave... say, this case, I can easily see on your theory writing the part of the opinion that says the acts in Nevada, the acts in Nevada that were arguably torts are certainly up to Nevada to pursue. But the discovery commissioner here, they say, went way too far in ordering discovery and ordered discovery that would have been relevant only to negligent action and only negligent action, really, that took place in California, though a Nevada resident was at issue. And they can't do that, says the opinion, because... because... and now this is where it seems to me there... something... what do I fill that blank with. They can't do that. They can't go over and, in Nevada, complain about negligent action as this discovery commissioner may have done, negligent action in California aimed at a Nevada resident where it's a tax action. They can't do that because... and now what? You see... do you see what's bothering me? I... at this point, it seems to me there has to be something in the Constitution that limits that, and this case may raise that problem because of the actions of the discovery commissioner. And, therefore, I think I need something to fill that blank with.
H. Bartow Farr, III: Well, as... I don't think, to start with, that the answer is the Full Faith and Credit Clause.
Stephen G. Breyer: All right, what is it?
H. Bartow Farr, III: I mean--
Stephen G. Breyer: I... it's an odd... an awkward vehicle, Full Faith--
H. Bartow Farr, III: --Right.
Stephen G. Breyer: --but what is the answer?
H. Bartow Farr, III: Well, I mean, I still think that, in the end, the answer is that this is a matter that one trusts to the judgment of states--
Stephen G. Breyer: So the answer is if they want to do that, they can do it.
H. Bartow Farr, III: --that if, in fact, there is a question about discovery, that--
Stephen G. Breyer: Uh-huh.
H. Bartow Farr, III: --I mean, that I... accepting the characterization, although I dispute it to some extent, but to the extent there's a question about discovery, that is simply part and parcel of the states being able to exercise their jurisdiction. I don't--
Ruth Bader Ginsburg: I thought discovery was--
David H. Souter: --Okay.
Ruth Bader Ginsburg: --interlocutory. I thought that we couldn't write in an opinion, as Justice Breyer has suggested, because I didn't think that that question was currently reviewable.
H. Bartow Farr, III: --Well, there's certainly nothing specifically in the question presented about discovery. The... the... the... again, to come back to the question presented, because we've discussed a wide range of issues, most of which I don't think are within the question presented, but when we come back to the question presented, the question is basically was the Nevada or the Nevada courts required to dismiss this action on summary judgment because of California's law of immunity? And... and the reason for that is because, according to California, the Full Faith and Credit Clause requires Nevada to enforce California's law of immunity.
John Paul Stevens: Mr. Farr--
H. Bartow Farr, III: Our view is... yeah?
John Paul Stevens: --do I understand... your comity argument basically is... it's kind a self-executing thing, because each time a state has to answer the comity question, it asks the question, what would I do if the tables were reversed? And as history teaches us, they generally treat the other sovereign the way they would want to be treated themselves. And that's--
H. Bartow Farr, III: Well--
John Paul Stevens: --well, that's the rule that seems to have been developed without any overriding constitutional command order here.
H. Bartow Farr, III: --That's correct, Justice Stevens. And, in fact, they have become more specific in applying comity, I believe, in saying we want to treat the other sovereign as we do treat ourselves, not just as we want to be treated. We are treating the other sovereign the way we treat ourselves.
David H. Souter: What if the... what if the case came, and they didn't do it? Justice Breyer's question, how do I fill in the blank? I... if, let's say, through this intrusive discovery process, systematically applied, they really were interfering with California's taxation, couldn't California bring an original action to enjoin this interference?
H. Bartow Farr, III: I certainly think that's possible. And, of course, as I've said, I mean, California can try to talk to Nevada and try to reach agreement at a sovereign level about this, or if, in fact... the Full Faith and Credit Clause has a specific express commitment to Congress of the right to declare the effects of other laws.
Anthony M. Kennedy: What would be the underlying-- --Underlying-- --substantive law in Justice Souter's proposed original action?
H. Bartow Farr, III: The... I suppose, I mean, based on what California has said before... said up to now, it would bring it under the Full Faith and Credit Clause, that it would say that there is some requirement--
Anthony M. Kennedy: Well, but we wouldn't need an original action for the Full Faith and Credit Clause. If that's so, it could apply in this case.
H. Bartow Farr, III: --That's correct. I mean, whether they're--
Anthony M. Kennedy: So what's the... what would an original action... there was... there's no underlying substantive standard to apply?
H. Bartow Farr, III: --I mean, the question would be, is there... obviously, the question that's being raised. I am not aware of the federal substantive standard--
William H. Rehnquist: We haven't--
H. Bartow Farr, III: --that says--
William H. Rehnquist: --in boundary cases, though, adopted, as a federal rule, something maybe different from the law of either state.
H. Bartow Farr, III: --That's correct. Now, you do have... there are certain cases, in fact, in which you can't have overlapping jurisdiction, where you can't own the same water, you can't own the same land, you can't escheat the same property. So that's true. The court has addressed those kinds of cases. In a situation where you're simply saying another state is applying its laws, I prefer that they apply our laws, and I'm troubled by the discovery that they have... they have allowed in applying their own laws, I'm not sure what the federal principle--
Ruth Bader Ginsburg: It's not simply that.
H. Bartow Farr, III: --is that entitles you to stop it.
Ruth Bader Ginsburg: It's not simply that it's a prior action pending. That's what makes this case different, and one of the things that makes it different from Nevada v. Hall. Why is it... is the California proceeding ongoing? Isn't it normal for a second court to stay its operations so it won't interfere with that prior action?
H. Bartow Farr, III: it... in fact, the Nevada court dismissed the declaratory judgment action precisely because it didn't want to get into the question that was at issue in the California proceeding.
Ruth Bader Ginsburg: Yes, but what about the intrusive discovery?
H. Bartow Farr, III: Well, most of the... most of the other material... with one exception, most of the other issues involved things that have nothing to do with the merits of the California inquiry. I mean, whether confidential information has been improperly disclosed has... is not... does not require you to adjudicate the California tax liability in order to understand that. The only thing that has any bearing that is close to that, I submit, is something that is roughly akin to like a malicious prosecution suit. And tort law itself, over time, takes care of that. We've not gotten to that issue yet in the Nevada Supreme Court.
William H. Rehnquist: Thank you, Mr. Farr.
Anthony M. Kennedy: Mr. Leatherwood, you have five minutes remaining.
Felix Leatherwood: Thank you, Your Honor. In this particular case, I'd like to go back to Justice Breyer's thumbscrew example. I don't think the Full Faith and Credit Clause would actually force Cal... force Nevada to apply... apply a California thumbscrew statute, because that would actually be outside the tax function. What I'm saying in this particular case what has happened is that Nevada's failure to give us back to California's immunity statute has resulted in interference with California's tax system. If this court does not intervene and give us back to our particular proposed test, which would look into California to see whether or not we would grant immunity, then essentially that would permit any defendant any form of taxpayer to run to the border and literally sue the State of California or any other state to prevent the enforcement of that particular statute. In addition, I pointed out that this gives another state the power to intrude into the actual operation of another state, and that's what has happened here. There has been some... some discussion as to whether or not Nevada has legislative jurisdiction. We concede that they have legislative jurisdiction over the tort. But we... what we complain about is that they won't respect our legislative jurisdiction or our tax process over our immunity laws, and that is our particular complaint. We submit the case.
William H. Rehnquist: Thank you, Mr. Leatherwood. The case is submitted.