- In Docket No. 35549, Franchise Tax Board petitioned this court for a writ
of mandamus or prohibition, challenging the district court's determination that
certain documents were not protected by attorney-client, work product or
deliberative process privileges, and its order directing Franchise Tax Board
to release the documents to Gilbert Hyatt. In Docket No. 36390, Franchise
Tax Board separately petitioned this court for a writ of mandamus, challenging
the district court's denial of its motions for summary judgment or dismissal,
and contending that the district court lacks subject matter jurisdiction over
the underlying tort claims because Franchise Tax Board is immune from
liability under California law. Alternatively, Franchise Tax Board sought a
writ of prohibition or mandamus limiting the scope of the underlying case to its
- On June 13, 2001, we granted the petition in Docket No. 36390 on the basis
that Hyatt did not produce sufficient facts to establish the existence of a
genuine dispute justifying denial of the summary judgment motion. Because our
decision rendered the petition in Docket No. 35549 moot, we dismissed it. Hyatt petitioned for rehearing in Docket No. 36390 on July 5, 2001, and in
response to our July 13, 2001 order, Franchise Tax Board answered on August 7,
2001. Having considered the parties' documents and the entire record before us,
we grant Hyatt's petition for rehearing, vacate our June 13, 2001 order and
issue this order in its place.
- We conclude that the district court should have declined to exercise its
jurisdiction over the underlying negligence claim under comity principles.
Therefore, we grant the petition in Docket No. 36390 with respect to the
negligence claim, and deny it with respect to the intentional tort claims. We
also deny the alternative petition to limit the scope of trial. We
further conclude that, except for document FTB No. 07381, which is protected by
the attorney work-product privilege, the district court did not exceed its
jurisdiction by ordering Franchise Tax Board to release the documents at issue
because Franchise Tax Board has not demonstrated that they were privileged.
Therefore, we grant the petition for a writ of prohibition n1 in Docket No.
35549 with respect to FTB No. 07381, and deny the petition with respect to all
the other documents.
- The underlying tort action arises out of Franchise Tax Board's audit of
Hyatt --a long-time California resident who moved to Clark County, Nevada--to
determine whether Hyatt underpaid California state income taxes for 1991 and
1992. After the audit, Franchise Tax Board assessed substantial additional
taxes and penalties against Hyatt. Hyatt formally protested the
assessments in California through the state's administrative process, and sued
Franchise Tax Board in Clark County District Court for several intentional
torts and one negligent act allegedly committed during the audit.
- During discovery in the district court case, Hyatt sought the release of
all the documents Franchise Tax Board had used in the audit, but subsequently
redacted or withheld. Franchise Tax Board opposed Hyatt's motion to compel
on the basis that many of the documents were privileged. The district court,
acting on a discovery commissioner's recommendation, concluded that most of the
documents were not privileged and ordered Franchise Tax Board to release those
documents. The district court also entered a protective order governing the
parties' disclosure of confidential information. The writ petition in Docket No.
35549 challenges those decisions.
- Franchise Tax Board then moved for summary judgment, or dismissal under
NRCP 12(h)(3), arguing that the district court lacked subject matter
jurisdiction because principles of sovereign immunity, full faith and credit,
choice of law, comity and administrative exhaustion all required the
application of California law, and under California law Franchise Tax Board is
immune from all tort liability. The district court denied the motion. The writ
petition in Docket No. 36390 challenges that decision. The Multistate Tax
Commission has filed an amicus curiae brief in support of Franchise Tax
Board's comity argument.
Propriety of Writ Relief
- We may issue an extraordinary writ at our discretion to compel the district
court to perform a required act, n2 or to control discretion exercised
arbitrarily or capriciously, n3 or to arrest proceedings that exceed the court's
jurisdiction. n4 An extraordinary writ is not available if petitioner has a
plain, speedy and adequate remedy in the ordinary course of law. n5
- A petition for a writ of prohibition may be used to challenge a discovery
order requiring the disclosure of privileged information. n6 A petition for a
writ of mandamus may be used to challenge an order denying summary judgment or
dismissal; however, we generally decline to consider such petitions because so
few of them warrant extraordinary relief. n7 We may nevertheless choose to
exercise our discretion and intervene, as we do here, to clarify an important
issue of law and promote the interests of judicial economy. n8
Docket No. 36390
- Nevada and California have both generally waived their sovereign immunity
from suit, but not their Eleventh Amendment immunity from suit in federal court,
and have extended the waivers to their state agencies or public employees,
except when state statutes expressly provide immunity. n9 Nevada has
expressly provided its state agencies with immunity for discretionary acts,
unless the acts are taken in bad faith, but not for operational or ministerial
acts, or for intentional torts committed within the course and scope of
employment. n10 California has expressly provided its state taxation agency, Franchise Tax Board, with complete immunity. n11 The fundamental question
presented is which state's law applies, or should apply.
- Preliminarily, we reject Franchise Tax Board's arguments that the doctrines
of sovereign immunity, full faith and credit, choice of law, or administrative
exhaustion deprive the district court of subject matter jurisdiction over
Hyatt's tort claims. First, although California is immune from Hyatt's suit
in federal courts under the Eleventh Amendment, it is not immune in Nevada
courts. n12 Second, the Full Faith and Credit Clause does not require Nevada to
apply California's law in violation of its own legitimate public policy. n13
Third, the doctrines of sovereign immunity and full faith and credit determine
the choice of law with respect to the district court's jurisdiction, n14 while
Nevada law is presumed to govern with respect to the underlying torts. n15
Fourth, Hyatt's tort claims, although arising from the audit, are separate
from the administrative proceeding, and the exhaustion doctrine does not apply.
The district court has jurisdiction; however, we must decide whether it should
decline to exercise its jurisdiction under the doctrine of comity.
- The doctrine of comity is an accommodation policy, under which the courts of
one state voluntarily give effect to the laws and judicial decisions of another
state out of deference and respect, to promote harmonious interstate relations.
n16 In deciding whether to respect California's grant of immunity to a
California state agency, a Nevada court should give due regard to the duties,
obligations, rights and convenience of Nevada's citizens and persons within the
court's protections and consider whether granting California's law comity would
contravene Nevada's policies or interests. n17 Here, we conclude that the
district court should have refrained from exercising its jurisdiction over the
negligence claim under the comity doctrine, but that it properly exercised its
jurisdiction over the intentional tort claims.
- Although Nevada has not expressly granted its state agencies immunity for all
negligent acts, California has granted the Franchise Tax Board such immunity.
n18 We conclude that affording Franchise Tax Board statutory immunity for
negligent acts does not contravene any Nevada interest in this case. An
investigation is generally considered to be a discretionary function, n19 and
Nevada provides its agencies with immunity for the performance of a
discretionary function even if the discretion is abused. n20 Thus, Nevada's and
California's interests are similar with respect to Hyatt's negligence claim.
- In contrast, we conclude that affording Franchise Tax Board statutory
immunity for intentional torts does contravene Nevada's policies and interests
in this case. As previously stated, Nevada does not allow its agencies to claim
immunity for discretionary acts taken in bad faith, or for intentional torts
committed in the course and scope of employment. Hyatt's complaint alleges
that Franchise Tax Board employees conducted the audit in bad faith, and
committed intentional torts during their investigation. We believe that greater
weight is to be accorded Nevada's interest in protecting its citizens from
injurious intentional torts and bad faith acts committed by sister states'
government employees, than California's policy favoring complete immunity for
its taxation agency. n21 Because we conclude that the district court properly
exercised its jurisdiction over the intentional tort claims, we must decide
whether our intervention is warranted to prevent the release of documents that Franchise Tax Board asserts are privileged.
Docket No. 35549
- Franchise Tax Board invoked the deliberative process, attorney-client and
work-product privileges as barriers to the discovery of various documents used
or produced during its audit. The district court decided that most of the
documents were not protected by these privileges, and ordered Franchise Tax
Board to release them. With one exception, we conclude that the district court
did not exceed its jurisdiction by ordering Franchise Tax Board to release the documents.
- The deliberative process privilege does not apply because the documents at
issue were not predecisional; that is, they were not precursors to the adoption
of agency policy, but were instead related to the enforcement of already-adopted
policies.n22 And if the privilege were to apply, it would be overridden by
Hyatt's demonstrated need for the documents based on his claims of fraud and
government misconduct. n23
- The attorney-client privilege does not apply because Franchise Tax Board
did not demonstrate (1) that in-house-counsel Jovanovich was acting as an
attorney, providing legal opinions, rather than as an employee participating in
the audit process, n24 or (2) that the communications between Ms. Jovanovich and
other Franchise Tax Board employees were kept confidential within the agency.n25
- The work-product privilege does apply, however, to document FTB No. 07381.
This memorandum documenting a telephone conversation between Franchise Tax
Board attorneys Jovanovich and Gould should be protected from
disclosure. When the memorandum was generated, Jovanovich was acting in her role
as an attorney representing Franchise Tax Board, as was Gould. The memorandum
expresses these attorneys' mental impressions and opinions regarding the
possibility of legal action being taken by Franchise Tax Board or Hyatt.
Thus, this one document is protected by the attorney work-product privilege. n26
- Finally, although Franchise Tax Board also challenges the district court's
protective order, we decline to review the propriety of that discovery order in
this writ proceeding. Although an extraordinary writ may be warranted to avoid
the irreparable injury that would result from a discovery order requiring
disclosure of privileged information, extraordinary writs are not generally
available to review discovery orders. n27 Franchise Tax Board has a plain,
speedy and adequate remedy; it may challenge the order on appeal if it is
aggrieved by the district court's final judgment.
- We conclude that the district court should have declined to exercise
jurisdiction over the negligence claim as a matter of comity. Accordingly, we
grant the petition in Docket No. 36390 in part; the clerk of this court shall
issue a writ of mandamus directing the district court to grant Franchise Tax
Board's motion for summary judgment as to the negligence claim. We deny the
petition in Docket No. 36390 with respect to the intentional tort claims, and we
deny the alternative petition to limit the scope of trial.
- We conclude that the district court exceeded its jurisdiction by ordering the
release of one privileged document, but that Franchise Tax Board has not
demonstrated that the district court exceeded its jurisdiction by ordering it to
release any of the other discovery documents at issue. Accordingly, we grant the
petition in Docket No. 35549 in part; the clerk of this court shall
issue a writ of prohibition prohibiting the district court from requiring
Franchise Tax Board to release document FTB No. 07381. We deny the writ
petition in Docket No. 35549 with respect to all other documents.
- We vacate our stay of the district court proceedings.
- It is so ordered. n28
Maupin, C.J., Young, J., Agosti, J., Shearing, J., Leavitt, J.
DISSENT: ROSE, J., concurring in part and dissenting in part:
- I would not grant, comity to the petitioners in this case and would grant
immunity only as given by the law of Nevada. In all other respects, I concur
with the majority opinion.
- In Mianecki v. District Court, n1 we were faced with a similar issue when the
State of Wisconsin requested comity be granted by Nevada courts in order to
recognize Wisconsin's sovereign immunity. In refusing to grant comity and
recognize Wisconsin's sovereign immunity, we stated:
In general, comity is a principle whereby the courts of one jurisdiction may
give effect to the laws and judicial decisions of another jurisdiction out of
deference and respect. The principle is appropriately invoked according to the
sound discretion of the court acting without obligation. "In considering comity,
there should be due regard by the court to the duties, obligations, rights and
convenience of its own citizens and of persons who are within the protection of
its jurisdiction." With this in mind, we believe greater weight is to be
accorded Nevada's interest in protecting its citizens from injurious operational
acts committed within its borders by employees of sister states, than
Wisconsin's policy favoring governmental immunity. Therefore, we hold that the
law of Wisconsin should not be granted comity where to do so would be contrary
to the policies of this state.
- Based on this very similar case, I would not grant comity to California, and I would extend immunity to the agents of California only to the extent that such immunity is given them by Nevada law. Denying a grant of comity is not uncommon, as California has denied comity to the state of Nevada in years past. n2
n1 Prohibition is a more appropriate remedy than mandamus for the prevention
of improper discovery. Wardleigh v. District Court, 111 Nev. 345, 350, 891 P.2d
1180, 1183 (1995).
n2 NRS 34.160 (mandamus).
n3 Round Hill Gen. Imp. Dist. v. Newman, 97 Nev. 601, 637 P.2d 534 (1981)
n4 NRS 34.320 (prohibition).
n5 NRS 34.170; NRS 34.330.
n6 Wardleigh, 111 Nev. at 350-51, 891 P.2d at 1183-84.
n7 Smith v. District Court, 113 Nev. 1343, 950 P.2d 280 (1997).
n9 NRS 41.031; Cal. Const, Art. 3, § 5; Cal. Gov't Code § 820.
n10 See NRS 41.032(2); Foster v. Washoe County, 114 Nev. 936, 941, 964 P.2d
788, 791 (1998); State, Dep't Hum. Res. v. Jimenez, 113 Nev. 356, 364, 935 P.2d
274, 278 (1997); Falline v. GNLV Corp., 107 Nev. 1004, 1009, 823 P.2d 888, 892
n11 See Cal. Gov't Code § 860.2; Mitchell v. Franchise Tax Board, 183 Cal.
App. 3d 1133, 228 Cal.Rptr. 750 (Ct. App. 1986).
n12 Nevada v. Hall, 440 U.S. 410, 414-21, 59 L. Ed. 2d 416, 99 S. Ct. 1182
n13 Id. at 421-24.
n14 Id. at 414-21.
n15 Motenko v. MGM Dist., Inc., 112 Nev. 1038, 1041, 921 P.2d 933, 935
n16 Nevada v. Hall, 440 U.S. at 424-27; Mianecki v. District Court, 99 Nev.
93, 98, 658 P.2d 422, 424-25 (1983).
n17 Mianecki, 99 Nev. at 98, 658 P.2d at 425.
n18 Cal. Gov't Code § 860.2; see Mitchell, 228 Cal.Rptr. at 752.
n19 Foster, 114 Nev. at 941-43, 964 P.2d at 792.
n20 NRS 41.032(2).
n21 See Mianecki, 99 Nev. at 98, 658 P.2d at 425.
n22 See Coastal States Gas Corp. v. Department of Energy, 199 U.S. App. D.C.
272, 617 F.2d 854, 866-68 (D.C. Cir. 1980).
n23 See In re Sealed Case, 326 U.S. App. D.C. 276, 121 F.3d 729, 737-38 (D.C.
n24 See Upjohn Co. v. United States, 449 U.S. 383, 389-97, 66 L. Ed. 2d 584,
101 S. Ct. 677 (1981); United States v. Chen, 99 F.3d 1495, 1501-02 (9th Cir.
1996); United States v. Rowe, 96 F.3d 1294, 1297 (9th Cir. 1996); Texaco Puerto
Rico v. Department of Consumer Aff., 60 F.3d 867, 884 (1st Cir. 1995).
n25 See Coastal States, 617 F.2d at 862-64.
n26 See Wardleigh, 111 Nev. at 357, 891 P.2d at 1188.
n27 Clark County Liquor v. Clark, 102 Nev. 654, 659, 730 P.2d 443, 447
n28 The Honorable Nancy Becker, Justice, voluntarily recused herself from
participation in the decision of this matter.
n1 99 Nev. 93, 98 658 P.2d 422, 424-25 (1983) (internal citations omitted).
n2 Nevada v. Hall, 440 U.S. 410, 418, 59 L. Ed. 2d 416, 99 S. Ct. 1182