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Keywords

tortlitigationattorneyappealpatentsovereign immunity
tortlitigationprecedentoverruledwrit of certiorarisovereign immunity

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Franchise Tax Board v. Hyatt, 137 Nev. 907, 485 P.3d 1247 (Table), 2021 WL 1609315

Facts

In October 1991, Gilbert P. Hyatt moved from California to Nevada just before receiving significant licensing fees from several patents. The Franchise Tax Board of California audited Hyatt's 1991 tax return and claimed he did not move until April 1992, leading to a tax deficiency assessment and fraud penalties exceeding $13 million. Hyatt sued FTB in Nevada state court, alleging intentional torts during the audit, which initiated over 20 years of litigation, including appeals to the Supreme Court regarding FTB's sovereign immunity.

In 1998, Hyatt sued FTB in Nevada state court alleging that FTB committed multiple intentional torts while conducting its tax audit; over 20 years of litigation ensued.

Issue

The main legal issues were whether FTB had sovereign immunity from suit in Nevada and whether it qualified as the prevailing party entitled to costs and attorney fees.

The main legal issue(s) or question(s) the court needed to resolve.

Rule

The court applied the principle that a party prevails in litigation if it succeeds on any significant issue, and costs must be awarded to the prevailing party under NRS 18.020(3). Additionally, the court considered the discretionary nature of awarding attorney fees under NRCP 68 and NRS 17.115.

A party prevails in an action 'if it succeeds on any significant issue in litigation'; it need not prevail on all claims to be the prevailing party.

Analysis

The court determined that FTB, despite losing earlier rounds, ultimately prevailed by winning the dismissal of all Hyatt's claims in the final round. The court noted that FTB's petitions to the Supreme Court were instrumental in changing the law regarding sovereign immunity, which was not a mere fortuitous benefit. Therefore, FTB was entitled to costs as the prevailing party under NRS 18.020(3).

Here, FTB lost every round except the last on its sovereign immunity defense. But, in the final round, it won dismissal of all Hyatt's claims, despite Hyatt's success in prior phases of litigation.

Conclusion

The court reversed the district court's denial of costs to FTB but affirmed the discretionary denial of attorney fees. FTB was recognized as the prevailing party entitled to costs dating back to the inception of the litigation.

Accordingly, we conclude that FTB is entitled to costs under NRS 18.020(3) as a matter of right.

Who won?

Franchise Tax Board of California (FTB) prevailed in the case because it ultimately succeeded in having all of Hyatt's claims dismissed, establishing its sovereign immunity.

FTB did not prevail based on a serendipitous change to decisional law unrelated to its litigation. Rather, FTB twice petitioned the Supreme Court for a writ of certiorari seeking reversal of Hall; without those petitions, the Court would not have overruled its longstanding precedent, and Hyatt's judgment would still stand.

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