Las Vegas Sun

July 17, 2019

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Court throws out Las Vegas man’s $389 million judgment in tax case

CARSON CITY — Acting at the direction of the U.S. Supreme Court, the Nevada Supreme Court tossed out a $389 million judgment for Gilbert Hyatt of Las Vegas, who sued the California Franchise Tax Board in a 19-year-old legal battle.

The court, in a 73-page decision released Tuesday by Justice James Hardesty, said Hyatt was entitled to collect $50,000 from the California agency, which was found guilty of fraud and intentional infliction of emotional distress.

Hyatt, while living in Los Angeles, developed a lucrative computer chip patent and moved to Las Vegas. The California board claimed Hyatt owed more than $10 million in taxes for 1991 and 1998 and conducted an aggressive campaign to collect the money.

But Hyatt declined to pay, maintaining he lived in Las Vegas and was not subject to the income tax of the adjoining state.

A jury in Las Vegas found the California board had harassed Hyatt, and the Nevada Supreme Court last year upheld the decision.

California appealed to the U.S. Supreme Court, which ruled the government agency could only be penalized the amount that a Nevada government could be assessed — $50,000.

In addition to the $389 million judgment, Hyatt was to be awarded $2.5 million in court costs.

The Nevada court upheld the finding of the jury that the California agency was guilty of fraud and had made false representations to Hyatt during its audit process. It said there was sufficient evidence that Hyatt was subjected to emotional distress during the long battle.

Hardesty also wrote that Hyatt was not entitled to $250 million in punitive damages as part of the overall $389 million judgment.

The court noted there was still legal action pending in California.

The Nevada Supreme Court initially ruled that the limits of immunity to $50,000 to protect Nevada governments did not apply when Hyatt was seeking damages from a California agency. The U.S. Supreme Court vacated that state ruling and sent the case back to Nevada.

The court sent the case back to Clark County District Court to re-evaluate court costs and attorney fees awarded to Hyatt.