Constitutional Logic and State Sovereignty

In the Supreme Court decision last month involving Justice Breyer’s widely reported sneer about “which cases the Court will overrule next,” the actual constitutional issue litigated, state judicial sovereignty, bears consideration. This is highlighted by the growing divergences today — on immigration, high taxes, and abortion, for example — in the policies and laws of the several states, and also in light of the fact that forty-four states filed a joint amicus brief defending their sovereignty.

What portion of sovereignty retained by the individual states under the Constitution has been an issue since ratification. Article IV, Section 1, of the Constitution requires that “Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State.”  That is, of course, a limitation of sovereignty – states must recognize the sovereignty of their fellow states to make law and policy.  The sovereignty of the states is under the American Constitution.  It is not the absolute sovereignty of foreign states to each other.

And Article III, Section 2, originally provided that “The Judicial Power shall extend . . .  to Controversies,” inter alia,  “ between a State and Citizens of another State.” In Chisholm v. Georgia (1793), the Supreme Court allowed a South Carolina citizen to sue the state of Georgia in federal court over a Revolutionary War debt.  Georgia refused to appear in court and responded that because of its sovereign immunity it could not be sued without its consent.  In various opinions in Chisholm, the Supreme Court essentially said that the new Constitution means what it says on the subject.  State sovereignty had been reduced by the Constitution.  A citizen of one state could sue another state in federal court.

Even though Chisholm was decided correctly under the language of Article III, its result was shocking to pervasive notions about state sovereignty.   Ratification of the Eleventh Amendment swiftly overturned Chisholm. The Amendment states that the federal judicial power “shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State . . .” That is, no citizen of one state can sue another state in federal court.

But can a state file a suit in its own state courts against another state? In Nevada v. Hall (1979), the Supreme Court allowed a California resident to sue the state of Nevada in California courts.  The tort case involved a Nevada-state-owned vehicle involved in a collision on a California highway.  Nevada was found liable at trial, and the damages awarded under California law vastly exceeded what could have been awarded against the state of Nevada under Nevada law, and Nevada, claiming state sovereignty, filed suit.   In a 6-3 decision, Justice Stevens, writing for the majority, noted that the issue of “whether a state may claim immunity from suit in the courts of another state” had never been addressed by the Court and could not be answered by reference to any precise language of the Constitution , even though, Stevens conceded, there was “widespread acceptance of the view,” at the time of the Founding, “that a sovereign state is never amenable to suit without its consent.”  The Court held that it would be an imposition on California’s own sovereignty if it were to be forbidden from applying its own tort damage laws in its own courts to the case.  The sovereign state of California, with the consent of its citizens, enacted a law different from the sovereign state of Nevada, with the consent of its citizens, Stevens held – that is,  states were like foreign countries to each other.

In dissent, Chief Justice Rehnquist denied that the states had retained that kind of absolutist independence under the Constitution.  He argued, instead, that the “logic of the constitutional plan,” as well as “the implicit ordering of relationships within the federal system,” at the time of the Founding meant that the states had sovereignty against suits in the courts of other states.  Justice Blackmun, also in dissent, agreed and went on to speculate about the general implications to the effect that that “the Court has opened the door to avenues of liability and interstate retaliation that will prove unsettling and upsetting for our federal system.

In the case just decided, Tax Board of California v. Hyatt, California and Nevada were at it again.  The dispute had begun when Hyatt had moved from California to Nevada to escape California taxes. After pursuing Hyatt into Nevada, California agents conducted an investigation in Nevada and concluded that Hyatt owed the state $10 million dollars in back taxes, interest, and penalties.   Alleging that California had committed certain torts against him in the course of the investigation, Hyatt sued the state of California in Nevada courts.  Previous rulings in the case dealt with questions of venue and civil law, and the case proceeded to the question of whether Nevada v. Hall should be overturned.

In a 5-4 ruling, the Court overruled Nevada v. Hall in an opinion authored by Justice Thomas, joined in by Chief Justice Roberts and Justices Alito, Gorsuch, and Kavanaugh.   Although conceding that no specific language of the Constitution decided the case, Thomas criticized the Hall decision for its “ahistorical literalism” that confined the analysis only to the specific language of the Constitution. And citing Marbury v. Madison and McCulloch v. Maryland, he countered that “there are many other constitutional doctrines that are not spelled out in the Constitution but are nevertheless implicit in the structure and supported by historical practice.”  He concluded that Hall had “misread[] the historical record.

Thus, the Hall and Hyatt decisions agree that, in the words of Justice Thomas in Hyatt, “no constitutional provision explicitly grants” a state immunity from being sued in the courts of another state. And both decisions agree, in the words of Justice Stevens in Hall, that at the time of the Founding, there was “widespread acceptance of the view that a sovereign state is never amenable to suit without its consent.” Hall concluded that such suits were therefore literally constitutional.  And Hyatt – citing judicial review, for instance! — concluded that there is more to the Constitution than its specific language. Thus, fundamental theories of interpretation, semantic literalism, “ahistorical literalism,” implicit understanding, and original intent, were at issue in both cases.

With the differences in the political trends among the states since the Hall case in 1979, together with ever more pronounced differences in the last several years, the Hyatt majority appears to have now placed significant obstacles on those states that might today have tendencies to undertake, in the words of Justice Blackmun in Hall, “avenues of liability and interstate retaliation that will prove unsettling and upsetting for our federal system.”

The precipitating act in Hyatt was Hyatt’s fleeing California because of that state’s high taxes.  With states like California and New York more and more committed to ever increasing taxation, regulation, and its high costs, tax flight to states with no state income taxes will inevitably increase.  Scrutiny of dual (and multiple) state residencies and dual (and multiple) state sources of income has long been a major object of attention of all state tax departments.  The 2017 federal tax-cut legislation that limited deductions for state and local taxes has caused a new round of tax flight.  In June, the United States Treasury Department issued a ruling forbidding the “work around” invented by some states seeking to get around the state-tax-deductions limitation.  That tactic allowed taxpayers to increase their deductible charitable contributions by re-designating portions of state and local taxes as charitable contributions.

In a case, Arizona v. California, that has just been filed with the Supreme Court invoking its original jurisdiction,  the state of Arizona has filed suit on behalf of its taxpayers against the state of California’s practice of taxing Arizona companies that do not actively conduct business in California but are only passive investors in California limited-liability companies.  The case involves attempted seizures in Arizona by the California tax authority pursuant to California tax law and courts.  In its brief filed in the Supreme Court, Arizona complains that California, “the most populous state with the largest economy . . . has enormous weight to throw around – and frequently does so at the expense of her sister states.”

With their resistance to federal law enforcement, and their granting of state drivers’ licenses, other public identifications, and public welfare, liberal and “sanctuary” states are inevitably going to come into legal and policy conflict about immigration with neighboring states.  Absent Hyatt, could California sue Nevada or Arizona in California state courts about California illegal-immigrants drivers’ licenses not being recognized in those states?

In 1979, the year of Hall, few could have thought that one state could sue in its own courts concerning the policies of other states on social issues like abortion, gay marriage, or LGBT rights.  In the context of the last year, however, which has seen the deepest disagreements and diametrically opposed policy choices among some states about abortion, for instance, could there be such suits?  If the Supreme Court in Hyatt had endorsed and not overruled Hall, could California today initiate a suit in its own courts for alleged reimbursement of California state medical benefits paid to a California woman who was denied an abortion in Alabama.

But it seems that not even the Hyatt decision and the Full Faith and Credit Clause can stop what are going to be fierce contentions between states about environmental and climate regulation.  In criticism of the failure of Congress to pass legislation, California, Oregon, and Washington, have already enacted and are diligently planning new and ever more comprehensive initiatives on these subjects.  What will happen when these grand plans come up against the physical reality that the air moves where the wind takes it and that no state can regulate or own it?