Premier Legal Group

Premier Legal Group Business litigation, corporate and transaction attorneys in Las Vegas, Nevada

09/14/2022

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08/17/2022

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02/13/2019

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08/17/2018

In Shores v. Global Experience Specialists, 134 Nev. Adv. Op. 61 (Nev. August 2, 2018), the Nevada Supreme Court revisited the standard for injunctive relief to enforce a noncompete covenant in an employment agreement. The Nevada Supreme Court determined that before injunctive relief can be granted for a likekihood of success on the merits, a non-compete agreement must be limited to the geographical areas in which the employer has particular business interests.

While an employer claiming breach of a non-compete agreement need not prove its case in order to obtain a preliminary injunction, it must make a prima facie showing that the non-compete agreement is reasonable in scope in order to establish a likelihood of success on the merits of such a claim.
In order to establish that a party is likely to succeed in enforcing a noncompete agreement for the purpose of a preliminary injunction, the court must look to whether the terms of the noncompete agreement are likely to be found reasonable at trial. Reasonable restrictions are those that are "reasonably necessary to protect the business and goodwill of the employer." A restraint of trade is unreasonable if it is greater than is required for the protection of the person for whose benefit the restraint is imposed. Courts will consider (1) the duration of the restriction, (2) the geographical scope of the restriction, and (3) the hardship that will be faced by the restricted party in determining whether a noncompete agreement is reasonable. The geographical scope of a restriction must be limited to areas where the employer has established customer contacts and good will. A noncompete agreement that reaches beyond the geographical areas in which an entity has protectable business interests, by definition, is not reasonably necessary to protect the business and goodwill of the employer.

In Shores, GES presented evidence that it had conducted business in 33 states, the District of Columbia, and Puerto Rico; a “nationwide” restriction was broader than GES’s territoty and restricted geographical areas in which GES has made no showing of business interests. For injunctive relief, GES had to demonstrate a reasonable probability of meeting its burden of proof that the noncompete agreement satisfied reasonability criteria, such that it would be enforceable, which included being limited to only those geographical areas in which GES has established customer contacts and good will.

This post is provided for informational purposes only and does not constitute legal advice.

04/12/2018

The Nevada Supreme Court issued a decision on April 12th, 2018 which defines the rights of parties when one party breaches a settlement agreement. In Cain v. Price, the Nevada Supreme Court considered whether one party's material breach of a contract releases the non-breaching party's contractual obligation to a third-party beneficiary. We conclude that it does. Because the promisor in this case failed to fulfill its contractual obligations to appellants under a settlement agreement, respondents as third-party beneficiaries were not entitled to the contract's release from liability.

The Cains entered into a "Settlement Agreement and Release of All Claims" with an entity called C4 and its CEO. In the Settlement Agreement, C4 agreed to pay the Cains $20,000,000 "no later than 90 days from February 25, 2010." In return, the Cains agreed to release C4 and its officers from any liability. C4 failed to pay $20,000,000 by the date specified in the Settlement Agreement. The Cains sued C4 and six of its officers, including the respondents Richard Price and Mickey Shackelford, for breach of the Settlement Agreement, fraud, civil conspiracy, negligence, conversion, and intentional interference with contractual relations. The district court granted summary judgment to Price and Shackelford, reasoning that the Settlement Agreement was supported by consideration and that the Cains bound themselves to that Agreement's release provision when they elected to seek damages for C4's breach of contract.

The Nevada Supreme Court held that the Settlement Agreement was a valid contract supported by consideration—namely the removal of a condition precedent to the payment of the sum of $20,000,000. Consideration is the exchange of a promise or performance, bargained for by the parties. A party's affirmation of a preexisting duty is generally not adequate consideration to support a new agreement; however where a party's promise offered as consideration differs from that which it already promised, there is sufficient consideration to support the subsequent agreement. The Nevada Supreme Court found that the unconditional promise to pay $20,000,000 was valid and new consideration for the Settlement Agreement.

However the District Court erred in holding that the Settlement Agreement released Price and Shackelford from liability. When parties exchange promises to perform, one party's material breach of its promise discharges the non-breaching party's duty to perform. RESTATEMENT (SECOND) OF CONTRACTS § 237 (Am Law Inst. 1981). If the non-breaching party's duty was to a third-party beneficiary, the same principle applies: the breaching party's "failure of performance" discharges the beneficiary's right to enforce the contract. Id. at § 309(2) & cmt. b. Moreover, a material breach of contract also "gives rise to a claim for damages." Id. at § 243(1). Thus, the injured party is both excused from its contractual obligation and entitled to seek damages for the other party's breach. Id. § 243 cmt. a, illus. 1.
Because C4 promised the Cains $20,000,000 in exchange for the Cains' promise to release C4's officers from liability for C4's conduct, the Cains were bound by their promise until C4 materially breached the contract on which C4's $20,000,000 was due. At that point, the Cains were released from their promise not to sue C4's officers. The complication stemmed from the $20,000,000 default judgment entered against C4 because the district court reasoned that the Cains elected to honor the Agreement and therefore bound themselves to its terms—namely, the promise not to hold C4's officers liable. In so reasoning, the district court conflated two remedy concepts: specific performance and damages for total breach of contract. In sum, C4's breach of the Settlement Agreement relieved the Cains of their obligation to Price and Shackelford, third-party beneficiaries under that Agreement.

The Nevada Supreme Court also ruled that the District Court abused its discretion in not compelling disclosure of personal financial documents. Discovery is proper for any matter that is not privileged and is relevant to the subject matter of the action before the court. NRCP 26(b)(1). However, due to privacy concerns and the potential for "abuse and harassment," a defendant's personal financial information can "not be had for the mere asking." To discover that information, a plaintiff must demonstrate some factual basis for [al punitive damage claim. To succeed on a punitive damage claim in this contractual context, the plaintiff must show by clear and convincing evidence that the defendant was guilty of "oppression, fraud or malice." NRS 42.005(1). The Cains pursued punitive damages on claims of fraud, civil conspiracy, and conversion. The Cains presented evidence showing that their loan proceeds were distributed to C4 officers rather than being used to purchase CMOs. While that evidence might not amount to "clear and convincing" evidence that Price and Shackelford committed "oppression, fraud, or malice," NRS 42.005(1), such alleged misuse of funds contrary to the contractual provisions constitutes "some factual basis" for those claims such that discovery was proper.

04/10/2018

The Nevada Supreme Court has recently issued a decision which defines what is a final judgment. In Kirsch v. Traber, 134 Nev. Adv. Op. 22, the Court determined that an Order denying a motion to dismiss was not a final judgment on the issue of demand futility in a shareholder derivative action. Therefore when a foreign court issued a contrary ruling, it was proper for the district court to give preclusive effect to that subsequent final judgment from a foreign court.

The Nevada Supreme Court held that in Nevada, a “final judgment” for issue preclusion purposes is defined as when is “sufficiently firm” and “procedurally definite” in resolving an issue. Applying this definition to the case, the Court determined the district court’s order denying a motion to dismiss was not a final judgment, because it was not subject to appeal, not supported with a reasoned opinion as it was denied without explanation, and the district court indicated it would revisit the demand futility allegations if plaintiff decided to amend the complaint.

03/23/2018

On March 21, 2018, in Saticoy Bay LLC Series 9641 Christine View v. Fed. Nat. Mtge. Ass’n, the Nevada Supreme Court ruled that the Federal Foreclosure Bar preempts Nevada’s HOA lien foreclosure scheme. The Court found that in 2008, the Federal Housing Finance Agency (FHFA) placed respondent Federal National Mortgage Association (Fannie Mae) into conservatorship pursuant to the Housing and Economic Recovery Act of 2008 (HERA). As conservator, the FHFA is authorized to take over and preserve Fannie Mae's assets and property.
FNMA had been assigned the deed of trust on the residence at issue in the litigation. Saticoy Bay purchased the property at an HOA foreclosure sale for $26,800. When Saticoy Bay sought to quiet title, FNMA asserted that the Federal Foreclosure Bar preempted Nevada’s HOA lien foreclosure statutes and prohibited a sale which would affect FNMA’s rights. The Nevada Supreme Court found that 12 U.S.C. § 4617(j)(3) (hereinafter, the Federal Foreclosure Bar) preempts NRS 116.3116, and thus, the foreclosure sale did not extinguish FNMA’s deed of trust without the FHFA's consent. Because FHFA did not consent to the foreclosure sale, Saticoy Bay's interest in the property was subject to the deed of trust. The implication is that any sale of a property by HOA foreclosure for which FHFA/Fannie Mae/Freddie Mac hold deeds of trust will be a sale subject to those entities’ interests and deeds of trust.

02/27/2018

On February 23rd, 2018, the Nevada Supreme Court ruled in Aliante Master Ass’n v. Prem Deferred Trust address the manner in which HOA Lien cases involving allegations of overcharging and overpayment are to be handled. The Nevada Supreme Court ruled that the district court lacked subject matter jurisdiction over the class members’ claims because they were not first submitted to the Nevada Real Estate Division (NRED) for mediation or arbitration under NRS 38.310. The Nevada Supreme Court further ruled that the district court erred in concluding the voluntary payment doctrine does not apply to class members' claims for breach of NRS 116.3116(2).

02/16/2018

In Felton v. Douglas County, 134 Nev. Adv. Op. 49 (February 15th, 2018), the Nevada Supreme Court addressed workers' compensation benefits for uncompensated volunteers. Volunteers are provided under the Workers Compensation statutes with a "deemed wage," a fictional salary from which benefits can be calculated if a volunteer, who would not otherwise be an "employee," is injured in the course of volunteer work; however many volunteers also have a paid job which is their actual rate of wages. The Nevada Supreme Court determined that the deemed wage must be aggregated with earnings from the injured volunteer’s concurrent private employment.

02/09/2018

In Quinn v. Eighth Judicial District Court, 134 Nev. Adv. Op. 5, which was issued on February 8th, 2018, the Nevada Supreme Court determined that a Nevada district court does not have authority to compel a California attorney to appear in Nevada for a deposition as a nonparty witness in a civil action pending in Nevada state court where the attorney has appeared pro hac vice in the action.

Moving Party sought to compel depositions of California attorneys in California, which was denied. Moving Party then asked the Nevada district court to compel depositions in Nevada for California attorneys who had participated in the Nevada action. Moving Party asserted that by appearing pro hac vice in this Action that the district court had personal jurisdiction over them. The Quinn Emanuel attorneys opposed the motion, arguing that the Nevada district court had no jurisdiction over the California discovery dispute under the Uniform Interstate Depositions and Discovery Act, which had been adopted by both California and Nevada, because the subpoenas were pending in the California superior court, which had already exercised jurisdiction over the matter and denied a similar request by Sinatra. The district court found that it had jurisdiction over the attorneys because they had appeared in Nevada court in this case on a pro hac vice basis and granted the motion to compel the depositions of the attorneys and ordered the depositions to take place in Las Vegas.

The California court concluded that it had jurisdiction over the subpoenas, applied a three-prong test identical to that used in Nevada for determining the propriety of attorney depositions, and found that Sinatra failed to establish a proper basis for deposing the Quinn Emanuel attorneys. The California court also found that the Opposition to Petition to Quash was without merit and awarded sanctions in favor of the Quinn Emanuel attorneys.

Under the Nevada Rules of Civil Procedure, the subpoena power of Nevada courts over nonparty deponents does not extend beyond Nevada state lines. In recognition of the limited reach of the subpoena power, Nevada and many other states, including California, have "adopted the Uniform Interstate Depositions and Discovery Act (UIDDA), which provides a mechanism for parties litigating in one state, the trial state, to issue a subpoena to a nonparty in another state, the discovery state. The UIDDA provides that when a party seeks out-of-state discovery, the party must first obtain a subpoena from the trial state (here, Nevada) and then submit that subpoena to the clerk of court in the discovery state (California), who then reissues the subpoena within the discovery state. Any motion practice associated with the discovery subpoena, such as a motion to enforce or quash a subpoena, must take place in the discovery state and is governed by the law of the discovery state. The discovery state has a significant interest in protecting its residents who become non-party witnesses in an action pending in a foreign jurisdiction from any unreasonable or unduly burdensome discovery requests. In Quinn, because the discovery was to take place in California and the deposition subpoenas were issued in California, the California court had jurisdiction over the discovery dispute that ensued between the Quinn Emanuel attorneys and Moving Party. The Nevada district court had no power to interrupt or interfere with California’s jurisdiction over the discovery dispute.

Moving Party argued that, regardless of the California court's jurisdiction over the discovery dispute, the Nevada district court properly exercised its jurisdiction in granting the motion to compel since the Nevada district court had inherent authority when it ordered the Quinn Emanuel attorneys to appear in Nevada for depositions. However there were no Nevada subpoenas in the matter; the subpoenas being enforced by the Nevada court were California subpoenas; the district court had no authority to enforce the deposition subpoenas issued in California.

The district court improperly conflated the concept of personal jurisdiction with that of subpoena power. Personal jurisdiction is based on conduct that subjects an out-of-state party "to the power of the [Nevada] court to adjudicate its rights and obligations in a legal dispute, sometimes arising out of that very conduct." Subpoena power, on the other hand, "is based on the power and authority of the court to compel the attendance at a deposition of [a nonparty] in a legal dispute between other parties." Merely because the Quinn Emanuel attorneys were admitted pro hac vice in the Nevada action would not confer on the Nevada district courts the power to require them to appear for deposition as nonparty witnesses.

10/27/2017

On October 26th, 2017, the Nevada Supreme Court issued an Advance opinion in Szymborski v. Spring Mtn. Treatment Ctr., 133 Nev. Adv. Op. No. 80, in which the Nevada Supreme Court ruled that claims for negligence, social-worker malpractice, gross negligence, negligence per se, and negligent hiring, supervision, and training are outside of the medical malpractice statute and do not require an Affidavit of Merit. Spring Mountain argued that because Szymborski's claims involve employees of a hospital rendering services, the claims must be for medical malpractice and NRS 41A.071's affidavit requirement applies. The Nevada Supreme Court disagreed and held that, when a hospital performs nonmedical services, the hospital can be liable under principles of ordinary negligence. The mere fact that a Claimant’s claims are brought against medical treatment facility not mean the claims sound in medical malpractice. Allegations of breach of duty involving medical judgment, diagnosis, or treatment indicate that a claim is for medical malpractice. If the reasonableness of the health care provider's actions can be evaluated by jurors on the basis of their common knowledge and experience, then the claim is likely based in ordinary negligence. The Nevada Supreme Court directed courts to look to the gravamen or "substantial point or essence" of each claim rather than its form to see whether each individual claim is for medical malpractice or ordinary negligence, especially where a party is in proper person.

10/24/2017

On October 23rd, 2017, the Nevada Supreme Court ruled in Bank of America v. Lee onthe standards for arbitrability in contracts. Bank of America sought to enforce deficiency judgment and assert breach of contract claims against Barcelona and various guarantors, including Lee. Lee learned that one of Bank of America's employees pleaded guilty to forging certain of the underlying loan documents. Bank of America moved to strike Lee's jury demand and to compel arbitration. The district court denied Bank of America's omnibus motion on grounds that Bank of America chose the court forum and should not be allowed to opt out of the very forum that it selected.
On appeal, the Nevada Supreme Court found that the parties disputed whether a contract existed, which is a factual question to be determined by the district court. Therefore the district court should have held an evidentiary hearing to determine whether a valid contract exists. See NRS 38.219(2); NRS 38.221(1)(b); see also 9 U.S.C. § 4 (2012). “Without the formation of a valid contract including an agreement to arbitrate and waive jury trial rights, arbitration could not be compelled and a jury trial could not be waived once demanded.”
The Nevada Supreme Court clarified that a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator; however under NRS 38.219(2) the court shall whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate. However, challenges going to the very existence of a contract that a party claims never to have agreed to must be decided by the Court. C]ourts should order arbitration of a dispute only where the court is satisfied that neither the formation of the parties' arbitration agreement nor . . its enforceability or applicability to the dispute is in issue. Where a party contests either or both matters, the court must resolve the disagreement.
However a valid contract with an Arbitration Clause exists, the case should be sent to the arbitrator. The Nevada Supreme Court noted that courts presume that the parties intend arbitrators, not courts, to decide disputes about waiver, delay, or a like defense to arbitrability. Any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability. Nevada has a public policy favoring the enforceability of contracts as written and thus even contractual jury trial waivers are presumptively valid.

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