October 8, 2014

Nevada Supreme Court reverses $250 million punitive damages award against California tax agency (Franchise Tax Board v. Hyatt)

Several years ago we reported on a jury verdict awarding a California taxpayer $250 million in punitive damages against the California Franchise Tax Board.  In a nutshell, the plaintiff claimed that the Tax Board made misrepresentations to him and portrayed him in a false light by telling others he was a tax cheat.

The Nevada Supreme Court issued an opinion last month affirming some of the liability findings in the plaintiff's favor but wiping out most of the damages, including the punitive damages.  The court held 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.”  Just like that, a $250 million punitive damages award is gone.  Poof! (Apologies to California Attorney's Fees.) 

Incidentally, California has the same rule: public entities are immune from punitive damages. (Government Code section 818.)

You can read more about the case at Taxable Talk and CalCorporateLaw.