Nevada Supreme Court Upholds Fraud Verdict Against The California Franchise Tax Board

Nevada Supreme Court Upholds Fraud Verdict Against The California Franchise Tax Board

9/19/2014

Keith Paul Bishop  

Allen Matkins Leck Gamble Mallory & Natsis LLP 

JD Supra

The Franchise Tax Board’s Shande

This is case that has been more than two decades in the making.  It began in the 1990s when inventor Gilbert Hyatt filed a California tax return showing that he relocated from California to Nevada.  Consequently, he reported licensing payments for only part of the year.  California was suspicious because his return reflected no moving expenses and it opened an audit.  This was really some audit, the Franchise Tax Board sent over 100 letters to third parties.  Many of these letters included Hyatt’s social security number, home address or both.  The FTB also interviewed Mr. Hyatt’s ex-wife and estranged brother and daughter.

Mr. Hyatt eventually had enough and sued the FTB in Nevada (state) District Court.  The FTB sought complete immunity based on the U.S. Constitution’s Full Faith and Credit Clause (Art. IV, § 1) and comity.  In an unpublished order, the Nevada Supreme Court said no and the FTB appealed to the U.S. Supreme Court. In Franchise Tax Bd. of Cal. v. Hyatt, 538 U.S. 488 (2003), the U.S. Supreme Court upheld the Nevada Supreme Court’s conclusion that the FTB was only entitled to partial immunity under comity principles. (California accords full immunity to the FTB in Government Code Section 860.2(b)).

When Mr. Hyatt’s case finally went before a jury, the case lasted four months.  The jury returned a verdict awarding Mr. Hyatt damages in the amount of $85 million for emotional distress, $52 million for invasion of privacy, a little over $1 million as special damages for fraud, and $250 million in punitive damages.  No one should be surprised to learn that the FTB appealed the verdict to the Nevada Supreme Court.

Yesterday, the Nevada Supreme Court affirmed the special damages award for fraud and the finding of liability for intentional infliction of emotional distress.  Franchise Tax Bd. of Cal. v. Hyatt, 130 Nev. Adv. Op. 71 (2014).   The court, however, found error in the trial court’s damage award and remanded the case for a new trial on damages on the emotional distress claim.  The FTB, however, was successful in obtaining reversals of Mr. Hyatt’s other causes of action.  More importantly, the Nevada held as a matter of first impression that because punitive damages would not be available against a Nevada government entity, the FTB is immune under comity principles for punitive damages.

Although the FTB dodged a punitive damage bullet, the opinion is recounts numerous instances of misconduct on the part of the FTB.  For example, the FTB represented that it would protect Mr. Hyatt’s confidential information and then distributed his personal information to numerous third parties and revealed that he was being audited.  Without determining which doctor actually treated Mr. Hyatt, the FTB sent letters to all doctors with the same last name.  The FTB should be ashamed.

More On Yiddish And The Law

One reader wrote to let me know about a 1993 article entitled “ “Lawsuit, Shmawsuit” by Judge Alex Kozinski and UCLA Law School Professor Eugene Volokh that discusses the use of other Yiddish words in U.S. legal opinions.  You can find the article at 103 Yale Law Journal 463 (1993).  Other readers pointed out that “knell” is not the antonym of kvetch.  I had intended to type kveln.  Rather than take responsibility, I’ll blame the autocorrect function.  

Finally, I must not let a discourse on kvetch pass without mention of this 2011 speech by former SEC Commissioner Elisse Walter in which she asserts:

Let’s face it — many of us lawyers were born to kvetch. It’s simply part of our DNA...

Law protects makers of generic drugs from lawsuits

What chance does the Hippocratic oath stand against a system that protects billions in medical profits?

Do No Harm?
Cindy Nunn
Simvastin Nightmares
June 18, 2014

Many pharmaceutical companies have physicians sitting on their Board of Directors, the very same people who have taken the Hippocratic Oath, which includes the following lines:

I will prescribe regimens for the good of my patients according to my ability and my judgment and never do harm to anyone.

I will give no deadly medicine to any one if asked, nor suggest any such counsel.

So naturally it boggled my mind that the United States Supreme Court ruled that makers of generic drugs could no longer be held liable and sued for damages caused by their products. What kind of free society allows such abuse of its citizens? What doctor in his (or her) right mind would consider this to be fair or right? Well, when I saw George Soros listed as a main share holder of Teva Pharmaceuticals the penny dropped. It seems our government has more interests in helping billionaires to further line their pockets with money than it does in protecting the health and well-being of the people of the United States.

Somehow, this has got to be changed. When a large corporation is basically given permission to CONTINUE harming people without having to suffer any repercussions we cease to be a fair, balanced and civilized society and instead become one where the sick and the poor are just fodder to be used and sacrificed in the goals of the greedy CEOs  to add more money to the millions and billions of dollars already nicely filling up their bank accounts.

While you lay in your bed crying due to the excruciating pain caused by Simvastatin, some greedy fat cat is lounging around on his/her yacht in the Mediterranean or driving around town in a Lamborghini. And you can do absolutely NOTHING about it because the pharmaceutical companies and our own Supreme Court say that you and your sufferings are worth NOTHING, zip, zilch, nada! However, you can bet your Aunt Nellie’s knickers that if a close member of one of these powerful CEOs suffered damages from a medication they would pay out huge amounts of money to the best lawyers around to sue the hell out of the company responsible!

People need to get mad. People need to get completely, totally, insanely ANGRY that this is being allowed to happen.

http://www.nytimes.com/2013/06/29/opinion/a-damaging-decision-on-generic-drugs.html?_r=0

http://www.nytimes.com/2012/03/21/business/drug-lawsuits-hinge-on-the-detail-of-a-label.html?pagewanted=all

http://www.sott.net/article/263713-Supreme-Court-rules-drug-companies-exempt-from-lawsuits

http://bobsnewheart.wordpress.com/2013/07/11/supremes-say-you-cant-sue-generic-drug-make-but-fda-may-change-that/

http://www.beckerlaw.com/2013/07/01/supreme-court-rules-generic-drug-makers-not-liable-for-drug-defects/

http://my.firedoglake.com/cranestation/2013/09/25/over-easy-scotus-shields-generic-drug-manufacturers-from-liability/

http://lawblog.legalmatch.com/2011/06/30/injured-by-a-generic-drug-you-cant-sue-over-inadequate-warnings/

This is why your Internet is slow; Today is the last day to comment to the FCC

Here's my comment to the FCC: "Do big business a real favor--preserve democracy, preserve the open Internet."

Daily Kos Action

Write and send your comment to the FCC urging them to preserve net neutrality

Battle for the Net PLEASE READ THE INSTRUCTIONS IN FULL BEFORE CLICKING THE SUBMIT BUTTON BELOW

September 15 marks the end of the public comment period at the FCC about the proposed net neutrality rules, which threaten the internet as we know it.

As the proposed rules stand, Big Cable and Telecom providers will lbe able to control the speed at which different websites load—including creating a fast lane for big corporations that can pay more, and slowing-down service to independent sites like Daily Kos that can't—to outright blocking content they don’t want on their networks.

Fundamentally, we are in a fight to determine who controls the internet—people or corporations...

Chief Justice Tani Cantil-Sakauye's word of the day: "counter-majoritarian"

CA SUPREME COURT'S CHIEF JUSTICE TO SPEAK SEPT. 11 IN SAN DIEGO
East County Magazine
September 10, 2014
(San Diego)

California Chief Justice Tani G. Cantil-Sakauye will be the featured speaker at “Informed Voters—Fair Judges” , a special program on the critical role voters play in preserving our country’s fair and impartial legal system.


Commentary
Word of the day, "counter-majoritarian"
by Sharon Kramer

Yesterday, I attended a meeting [in San Diego] of which the subject matter was "Informed Voters -- Fair Judges".

Chief Justice Cantil-Sakauye was the keynote speaker. In fact, besides her introduction by Justice McConnell and the announcement by a gentleman from UCSD that it was time to mingle, Tani was the only speaker.

According to Tani, her courts are "counter-majoritarian" and must be, to keep the courts "fair and free". She claims that decisions in the branch are made independently -- not by majority rule. Thus, she is practicing "counter-majoritarian" in the name of democracy.

She also stated that Chief Justice Ronald George was a "wonderful, honorable, visionary" and that McConnell has worked with him for a long time to help keep the courts fair and free from outside interests influencing the courts.

[Maura Larkins' comment: Next we need to work on preventing INSIDE interests from influencing the courts. Insiders are able to exercise an extraordinary amount of arbitrary power, in my experience. The Chief Justice could begin to fix this by providing enough money to bring back court reporters for civil cases.]

Then she stated that McConnell also worked with the President of the Cal Chamber of Commerce on the project of ensuring impartial courts. (I laughed out loud at the irony and oxymoron of this statement. Fortunately, I don't think anyone besides those sitting next to me, heard me.)

This Emmy winning short video was played. "Fair and Free"
http://www.youtube.com/watch?v=aTeFLkueTkQ

McConnell and an executive committee that she chairs, authored a pretty good little booklet to teach children of how the courts are suppose to work. Seems to me that it would be beneficial for many if she would also take the time to read it!

The CJ told an anecdotal story of a dinner she had with a legislator who she said would remain nameless. According to her, this legislator said that the trial judges report to the chief justice and the chief justice reports to the legislature.

Moans of sympathetic disgust went out in the crowd of the audacity of the statement by the imperialistic legislator. Parlaying on the audience favorable response, she then stated "and this legislator is a lawyer" and that after he said that, the dinner was over.

I got the impression that she was referring to Governor Brown and I seriously doubt that's what he actually said. I would envision it being more of "Get control of the fraud, waste and abuse in the judicial branch. The Judicial Council is not getting any more money from the legislature until you do."

Basically, it seemed like a cocktail party stop on the campaign trail to garner support for more money for the Judicial Council and their staff to control -- so they can be free to administer justice in the counter-majoritarian manner as taught by the wonderful, honorable, visionary Ron George.

Several San Diego judges and justices were in attendance including Justice Joan Irion, Nationwide Chair, Informed Voters—Fair Judges Project; and the appetizers were outstanding!.

Judge: "Who is she to question my integrity?"

Some judges feel free to violate judicial ethics, blatantly and in full view of fellow citizens, because they believe that those citizens will be ignored by the Judicial Commission and government officials.

And, I suspect, for the most part, those judges are right.

When those citizens are court personnel, the judge figures that they're afraid they'll lose their jobs if they talk. And, of course, they probably will lose their jobs. We'd have a better system if we actually enforced whistle-blower protections.

Previously, Judge Frances Kaiser served as Kerr County Sheriff.












City reviews ethics claims against municipal judge
September 11, 2014
By Jessica Hawley-Jerome
Bandera Bulletin

Citing a hostile work environment and unethical practices, the City of Bandera municipal court clerk has filed a complaint with the State Commission on Judicial Conduct and tendered her resignation.

“The hostile environment within the court offices was created due to the lack of ethical character and the constant chaos and divided factions affected by fear-inducing verbiage and actions by Judge [Frances] Kaiser,” Laura Phipps wrote in her Sept. 8 letter of resignation.

Shortly after she began her employment in May, Phipps said she witnessed numerous questionable activities, including bypassing judicial protocol and allegedly tampering with a jury pool. She documented most of what she said she saw, primarily for her own protection. Phipps said Kaiser discussed ongoing and pending cases with friends and colleagues, and was not objective, making judgments about defendants before their hearings.

“With respect to the position of Judge Kaiser…all defendants and all case files have not been treated impartially or fairly,” Phipps said. “The fundamental elements of a municipal court are that the judge be impartial, ensure that justice is done, and oversee the general administration of the court… Intrinsic to all sections of the Texas Code of Judicial Conduct are the precepts that judges, individually and collectively, must respect and honor the judicial office as a public trust and strive to enhance and maintain confidence in our legal system.”

Phipps said she confided her concerns to City Marshal Charlie Hicks, who then approached City Administrator Lamar Schulz and a City Council member. Phipps told Schulz and Mayor Don Clark about her observations and said that Kaiser had created an oppressive work environment in which she berated other city employees.

Phipps said Kaiser submitted her letter of resignation on Wednesday, Aug. 20, however it was not accepted and she was asked to return to work the next week. Schulz denied that claim, stating Kaiser never submitted anything.

“Frances never has never submitted a letter of resignation,” Schulz told the Bulletin, adding Phipps’ complaints are under review. “Right now we are doing due diligence on our side. The allegations are not totally substantiated at this point.”

Schulz said Phipps provided him with some information and copies of certain documents, and they are being reviewed...

Phipps was granted unpaid administrative leave on Aug. 28; her request for paid administrative leave or transfer to another department was denied. In an email to Schulz dated Sept. 4, Phipps asked if City Council members were aware of her complaint and her request for paid administrative leave, and whether there would be a council review. She said has not received a response.

“I refuse to accept the opportunity to return to a hostile work environment and refuse to compromise my moral or ethical values,” Phipps said. “The city population should be outraged at the lack of response by the city administration to these activities.”

Kaiser said she is shocked by the allegations made against her and vehemently denies any wrongdoing. She said she never discussed city personnel with Phipps nor did she violate the Judicial Code of Conduct.

“I’m absolutely astonished and very alarmed,” Kaiser told the Bulletin. “I never had any inkling that [Phipps] was unhappy or there was a problem. I trusted her.”

[Maura Larkins' comment: The judge apparently trusted the clerk to keep quiet about wrongdoing.]

Kaiser said Phipps’ recount of alleged jury pool tampering was misguided. Phipps said Kaiser comprised a selection of potential jurors from a list of city residents, then asked her to shred the original list once entered into the system. Kaiser said it was true that she oversaw the list, but she said she did not choose the final jurors.

“I don’t see anything wrong with it,” Kaiser said, adding protocol in a small-town municipal court is different from county or district court. “My integrity would be very much compromised if that happened…who is she to question my integrity?”...

Read more here.

Brouhaha in Bandera's Municipal Court
By Judith Pannebaker
BCC Editor
2014-09-11

...According to Kaiser, the dispute occurred when she and Phipps were selecting a potential jury pool for an upcoming trial. After receiving a list of names from the city utility department, Kaiser said she randomly highlighted those city residents who would receive jury summonses. "I highlighted the names randomly and methodically. I didn't know anyone living in the city," Kaiser insisted. "However, Ms. Phipps called it jury tampering."

This precipitated the meeting and Phipps' subsequent resignation...

[Maura Larkins' comment: Why didn't the judge simply choose the first names on the list, or every other name? It is simply not acceptable for her to specifically choose names, and then claim that she chose them randomly.]

Attorney Convicted of False Imprisonment for Planting Drugs in School Volunteer's Car

Kent Easter isn't the only attorney who thinks he's above the law, but he takes the concept to a new extreme of pettiness and irrationality.

Attorney Convicted of False Imprisonment for Planting Drugs in School Volunteer's Car
By deceiving police, Kent Easter caused Kelli Peters to be detained and questioned, a prosecutor said. Peters had insulted Easter's son.
By PAUL ANDERSON City News Service
Updated by By Penny Arévalo (Patch Staff)
September 10, 2014

An Irvine attorney who helped plant drugs in the PT Cruiser of a school volunteer because of a perceived insult to his son was convicted today of false imprisonment by fraud and deceit.

It was the second trial for Kent Easter, who faces up to three years in prison. Another jury last November deadlocked 11-1 in favor of convicting him, forcing a mistrial. Jurors this time around deliberated about an hour before returning a verdict.

His wife pleaded guilty last year to false imprisonment for her role in the smear attack and was sentenced to 120 days in jail and 100 hours of community service. She was released from jail earlier this year after completing her sentence and had her law license suspended in March.

Orange County Superior Court Judge Thomas Goethals ordered Easter back to court Thursday afternoon to set a sentencing date. Goethals was inclined to have the defendant handcuffed and sent to jail today, but he asked for more time to make arrangements for the care and custody of his three children, ages 7, 8, and 11.

Goethals questioned why Easter had not made arrangements prior to today, considering the first jury nearly convicted him. Easter, 40, and his attorney argued that his 41-year-old estranged wife was “spiraling down” emotionally.

The couple are in the midst of a divorce. Kent Easter is living in Newport Beach while Jill Easter lives with their children in their Irvine home, according to defense attorney Thomas Bienert Jr....

The jury foreman said the panel was convinced by phone records that showed the defendant’s cell phone was used near the victim’s home the night the drugs were planted in her car. The jury did not believe the defendant’s claim that his wife was using his phone that night, the foreman said.

Prosecutor Christopher Duff said in his closing argument that even if the defendant did not personally plant the marijuana pipe, Vicodin and Percocet in school volunteer Kelli Peters’ car on Feb. 16, 2011, he was still guilty of false imprisonment because it was his call to police that led to her detention and questioning.

“He called police knowing these drugs were planted in the car,” Duff said. “He knew Kelli Peters didn’t put those drugs in the car. His role in the crime is complete when he makes that call to police.”

Easter’s attorney claimed that his client was an unwitting dupe of a conspiratorial, pushy wife, and downplayed the detention of the victim, as Irvine police realized within minutes the volunteer was being set up.

Duff said the Easters’ vendetta against Peters started in February 2010 when Jill Easter picked up her then-5-year-old son after classes at Plaza Vista School in Irvine. It took a few minutes to find the boy, who was a little dirty and crying when he was found but was otherwise OK, Duff said.

Jill Easter grew enraged when Peters said the boy was “slow,” meaning he lagged when it was time to line up with the other children, Duff said. Jill Easter took the comment as an insult to her son’s intelligence, Duff said.

The couple wrote a letter demanding Peters’ dismissal, filed for a restraining order against her, and then tried to file a complaint with police for false imprisonment, Duff said. They also tried to sue Peters, but she was not served with papers and the case was withdrawn.



Kent Easter admitted he called Irvine police and gave them a fake Indian name after he alerted authorities that Peters was seen driving to the school erratically and had pills in her car. Duff alleged that Easter even affected an Indian accent...

See more details HERE.

Ex-San Ysidro district superintendent Manuel Paul admits squeezing contractor for donations

If we look at the extremely high percentage of women and people of color among the officials indicted by the District Attorney's Public Integrity Unit over the years, we are forced to conclude one of two things:

1) either women and people of color are more corrupt than white males; or

2) the people who are targeted for prosecution do not enjoy the same protections and immunities that white male public officials in San Diego tend to enjoy.

I'm not saying that the DA is racist.  I don't think that's it.  I think the explanation for the gender and color imbalance is simply that the public officials with the most power tend NOT to be women or people of color.  The truly powerful public officials are mostly white males, and the DA wouldn't dare go after them.

And the big money isn't in parking lots in San Ysidro.  It isn't even in $20 million solar panel deals.

A few years ago the FBI was investigating kickbacks to public entities in San Diego from insurance companies. Nothing ever came of that. My guess is that they couldn't find an ideal defendant to indict: someone without connections in the high ranks of the San Diego political establishment.

Here is a link to my page about the County of Santa Clara vs. Driver Alliant Insurance Services, Inc., et al lawsuit.  These are the types of transactions that involve significant amounts of money.  The really big deals are not as much fun for the political establishment to talk about as a small cash envelope in a parking lot--so you don't read about them much in the paper. The big players almost always avoid criminal court. Note the lack of prosecutions in the 2009 Financial Crisis that was caused by the greed of the wealthy and powerful.

The big guys generally don't see the inside of a criminal court, and their civil cases get settled, not tried, where the public might get wind of what actually happened. (Of course, the Manuel Paul case wasn't tried in court, either. Why no trials? Who knows what information might come out in a trial that might expose a big fish?)

Here's a sample of a school district deal worth $1 billion: Superintendent John Deasy of Los Angeles Unified school district (LAUSD) probably isn't worried. I suspect that you need a lot better political connections to become superintendent of LAUSD than you do to get the top spot in San Ysidro School District.

Given that we live in a system in which huge corporation and billionaires believe they can buy elections, it's sort of embarrassing that the FBI is chasing down such small-time players.

Clearly, Bonnie Dumanis and the FBI aren't going to be able to stop campaign finance corruption.

But wouldn't it be nice if the public--and Bonnie Dumanis--started looking a little closer at some of the well-heeled districts on the north side of town?

In CVESD we also had a superintendent using his power to affect the school board election.



See all posts on white chalk crime.

Ex-San Ysidro district superintendent Manuel Paul admits squeezing contractor for donations
Channel 10 News
Aug 20, 2014

SAN DIEGO - A former San Ysidro School District superintendent pleaded guilty in federal court Wednesday to extracting political contributions from a prospective contractor by threatening to withhold work on future building contracts.

Manuel Paul, 63, faces up to a year in federal prison and a $100,000 fine when he is sentenced Nov. 18.

According to his plea agreement, Paul admitted he asked a contractor to contribute $3,600 to three political candidates for the 2010 School Board election...

Read more.

Prosecutor Joe Freeman Britt, no longer admired for record-breaking number of Death Row convictions

As 2 Go Free, a Dogged Ex-Prosecutor Digs In

By RICHARD A. OPPEL Jr. 

New York Times

SEPT. 7, 2014

LUMBERTON, N.C. — The most memorable moment of the trial that put Henry McCollum and Leon Brown behind bars for three decades for a hideous 1983 rape and murder was a display of brilliant courtroom theatrics.

District Attorney Joe Freeman Britt of Robeson County, who stood 6-foot-6 and came to be known as America’s “Deadliest D.A.,” asked jurors to try to hold their breath for five minutes — the time it took the 11-year-old victim to choke to death, after her killer stuffed her panties down her throat with a stick — to get a small sense of the horror she experienced.

The jury came back with two of the more than 40 death penalty convictions Mr. Britt won over almost two decades.

Those two convictions — obtained on the basis of inconsistent, soon recanted, confessions from two mentally impaired teenagers who said they had been coerced to sign statements written by interrogators, and testimony from an informer who previously did not implicate the two young men — were overturned last week. Mr. McCollum and Mr. Brown were exonerated and set free.

Photo

Leon Brown in his death row cell block in 1987. Credit Scott Sharpe/The News & Observer, via Associated Press

Their release concluded a judicial horror story in which the two men were sent to death row though no physical evidence linked them to the murder, while a serial sex offender who lived less than 100 yards from the crime scene — and who, a few weeks after that murder, would kill a teenage girl nearby in strikingly similar circumstances — was never pursued as a suspect.

But if the case was finally closed, the episode reopened ugly memories of what critics say was a merciless criminal justice system that ran roughshod over helpless people for decades in this poor, sprawling, racially volatile county sometime known as the Great State of Robeson.

At the heart of that is the legacy of Joe Freeman Britt, who earned a spot in “Guinness World Records” and a “60 Minutes” profile for his prowess in sending people to death row. (Only two were eventually executed. The most infamous was Velma Barfield, 52, who died from lethal injection in 1984 for killing her fiancé by poisoning his beer.)

And whereas Mr. Britt, now 79 and retired, once dominated this county and won headlines for convictions, now some on both sides of the courtroom see a different tale.

The current district attorney, Johnson Britt, whose grandfather was first cousin to Joe Freeman Britt’s father, suggested that his predecessor could be tyrannical.

“He is a bully, and that’s the way he ran this office,” he said. “People were afraid of him. Lawyers were afraid of him. They were intimidated by his tactics. And he didn’t mind doing it that way.” He added: “You treat people with dignity, and you can get a whole lot more done that way than you can by trying to run over people. And that’s part of his legacy, that he ran over people.”

In a subsequent interview, Joe Freeman Britt made it clear that Johnson Britt was not his kind of prosecutor, either.

“Well, let’s say, if I was a bully, he is a pussy. How about that?” the elder Mr. Britt said...

Read more.