High court weighs power of state courts in bitter tax fight

WASHINGTON (AP) — The Supreme Court on Monday struggled to resolve a bitter tax dispute between a Nevada inventor and California officials that has spanned more than two decades and raises broader questions about whether a state agency can be hauled into another state's courts against its will.

The justices heard arguments in a case involving Gilbert Hyatt, a former California resident who claims he moved to Las Vegas in 1991, just before collecting $40 million in patent fees for a computer microprocessor chip.

California has aggressively pursued Hyatt for millions in back taxes, but Hyatt sued California's tax agency in Nevada, alleging overzealous officials invaded his privacy and committed fraud while pursuing him.

Clement said his argument goes back to the founding of the nation and the framing of the Constitution, when states entered the union with substantial war debts and did not expect to face lawsuits in other state courts that could potentially lead to bankruptcy.

While the Nevada Supreme Court ruled that California was immune from punitive damages, it nevertheless declined to place a $50,000 cap on compensatory damages that applies to lawsuits against Nevada officials.