Jury awards $388 million judgment

A case that has dragged through courts for a decade has resulted in a staggering $388 million award for a Las Vegas inventor against California state tax authorities.

Mark Hutchison, lead attorney for inventor Gilbert Hyatt, said he expects an appeal to the verdicts issued over the past two weeks in Clark County District Court.

“This phase of the case is over,” he said. “I’d be shocked if this is the end, based on how hard the California Franchise Tax Board has fought every step of the way for 10 years.”

The civil lawsuit was filed in 1998, alleging fraud, intentional infliction of emotional distress, abuse of process, breach of confidential relationship and invasions of privacy, Hutchison said.

An eight-member civil jury decided against the tax agency, awarding Hyatt more than $138 million in liability and compensatory damages on Aug. 6 and $250 million in punitive damages Thursday, he said. The decision to award those amounts was unanimous in the first verdict and 7-1 in the second, he said.

At issue in this suit, Hutchison said, was whether the FTB engaged in wrongful acts when it conducted a residency audit to see if Hyatt owed taxes on licensing income generated from many of his U.S. patents in the early 1990s.

Hyatt maintains that he moved from La Palma, Calif., to Las Vegas in September 1991. According to Hutchison, the FTB said Hyatt was a Golden State resident until early April 1992.

Hyatt, 70, is an electrical engineer and inventor with more than 70 U.S. patents, including one in 1990 for a computer microprocessor, Hutchison said.

The case was filed under seal in 1998; the case file now contains more than 2,100 documents. Clark County District Judge Jessie Walsh on Friday ordered it to remain sealed, according to court records.

Sealed cases do not automatically include gag orders prohibiting participants from discussing the cases, but they do deny media and other members of the public the opportunity to independently confirm their statements by examining documents.

It was not immediately clear if the FTB would appeal.

“We’re reviewing the matter and hope to have a decision soon,” said John Barrett, spokesman for the tax board in Sacramento.

Patricia Lundvall, the Nevada lawyer who represented the California tax authority, was traveling and unavailable for comment, an aide said.

Hutchison said the combined awards are among the largest rendered by a U.S. jury in favor of a single defendant.

“It sends a clear message that government abuse and over-reaching will not be tolerated by Nevada citizens,” he said. “I think the message is: If you are going to audit Nevada residents, you had better do so in a fair and impartial manner and not be results-oriented in seeking to grab money from Nevada residents.”

Reached by phone Monday, Hyatt said the length of his California residency remains in dispute. He expects the California State Board of Equalization to hold a hearing on that matter in a year or two.

Hyatt said the FTB claims he owes more than $50 million, including penalties for fraud. That figure is based on income generated by 24 of his patents.

Hyatt described the recent jury verdicts as “well-reasoned.” Jurors listened to 14 weeks of testimony, he said.

“I’m pleased with their verdicts because I believe it will send a message to the Franchise Tax Board that they cannot continue these kinds of tactics,” he said.

Hyatt alleged the taxing authority had falsified evidence during his audit to reach predetermined conclusions and had rubber-stamped flawed audits in the review process.

But the verdicts fail to give him a sense of closure.

“It will never close because the issue is reform of a very bad government taxation system that abuses taxpayer rights, and the reform process will continue on,” Hyatt said.

He expects appeals from the FTB will tie up the awards for years. He said he will devote at least some of the money to fight for reform.

“I look at it as a philanthropic project to use these verdicts to help reform governmental abuse of citizens.”

The California tax board lost arguments before the Nevada Supreme Court and the U.S. Supreme Court that Nevada courts were an inappropriate forum to hear the case, before the trial was conducted in Las Vegas, Hutchison said.

The Associated Press contributed to this report. Contact reporter Margaret Ann Miille at mmiille@reviewjournal.com or 702-383-0401.

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