Month: June 2015

Are conversations during deposition breaks privileged?

Posted on by Jeff Jaeger

Coyote Springs Inv. v. Eighth Jud. Dist. Ct. (Nev. Supreme Ct. – Apr. 2, 2015)

The issue is whether a private communication between a witness and an attorney during a requested break in the witness’s deposition is entitled to protection from discovery under the attorney-client privilege.

Coyote Springs sued BrightSource, arguing that a lease’s termination was ineffective without payment of the termination fee. In preparation for trial, the parties deposed Whittemore, the former co-owner and manager of Coyote Springs. Whittemore testified that he and Coyote Springs’ general counsel, Cargill, negotiated the lease for Coyote Springs. Whittemore’s deposition was continued and resumed nearly six months later, and BrightSource’s counsel further questioned Whittemore about his approval of term sheets and the lease summary. After BrightSource’s counsel completed this round of questioning, Coyote Springs’ litigation counsel suggested taking a break and requested a conference room for him, Whittemore, and Cargill. BrightSource’s counsel objected to any discussion during the break regarding questions that Whittemore had been asked. Coyote Springs’ litigation counsel and Cargill then met with Whittemore in a conference room.

Following Whittemore’s depositions, BrightSource filed a motion in limine to exclude Whittemore’s post-conference testimony and to “elicit at trial the substance of what was said during the private conference.” At a hearing on the motion, the district court concluded that “in general. . . you can’t do your witness prep during breaks” and explained that “if [Whittemore] talk[ed] about it at a deposition break and it wasn’t part of his preparation that was done ahead of time, it may be fair game” for inquiry.

At the close of BrightSource’s case, Coyote Springs made an oral motion for reconsideration of the Whittemore deposition issue. The district court denied the oral motion at the time, but the judge stated that she would reconsider after hearing closing arguments. The court stayed the entry of its findings of fact and conclusions of law pending resolution of the Coyote Springs’ petition.

Coyote Springs argued that writ relief was warranted because its attorney-client privilege was not waived when its witness and its counsel had privileged communications during a deposition break. BrightSource asserted that the private conference with Whittemore was not privileged because there was discussion about Whittemore’s substantive testimony in order to prepare him for examination or to refresh his recollection.

The Nevada Supreme Court found that Coyote Springs’ record of the deposition conference was insufficient to show that the communication was privileged. Specifically, the Court held that attorneys may confer with witnesses during an unrequested recess or break in a discovery deposition. The Court also held that attorneys may not request a break to confer with witnesses in a discovery deposition unless the purpose of the break is to determine whether to assert a privilege. The Court additionally held that once the deposition proceedings resume after a private conference that is requested to determine whether to assert a privilege, the attorney must place the following on the record: (1) the fact that a conference took place; (2) the subject of the conference; and (3) the result of the conference, specifically, the outcome of the decision whether to assert a privilege. The Court stressed that counsel must make a record of the confidential communications promptly after the deposition resumes in order to preserve the attorney-client privilege.

Thus, the Court found that the communications between Whittemore and Coyote Springs’ counsel during the break in Whittemore’s deposition were not privileged because Coyote Springs requested a break in the proceedings, failed to make a record of the result reached in the conference, and failed to make a prompt record of the communications.

Can a guilty plea for a drug offense be used to deny unemployment benefits?

Posted on by Jeff Jaeger

Hohenstein v. State, Emp’t Sec. Div. (Nev. Supreme Ct. – Apr. 2, 2015)

NRS 453.3363 affords certain first-time drug offenders the opportunity to avoid a criminal conviction if the offender pleads guilty, then successfully completes a probationary period. Upon successfully completing probation, the offender is discharged and the charges are dismissed. Addressing the civil consequences of such a plea to the offender who successfully completes probation, NRS 453.3363(4) provides: [D]ischarge and dismissal under this [statute] is without adjudication of guilt and is not a conviction for purposes. . . of employment, civil rights or any statute or regulation or license or questionnaire or for any other public or private purpose.”

The issue is how does this statute apply to a public school teacher who was terminated after pleading guilty but before completing probation, specifically, whether a guilty plea pursuant to NRS453.3363 may be used to deny unemployment benefits to the terminated teacher.

Hohenstein, a teacher for the Washoe County School District (WCSD), was arrested for and pleaded guilty to possessing marijuana in his residence in violation of NRS 453.336. Because this was his first offense, the district court did not enter a judgment of conviction. Instead, it suspended Hohenstein’s sentence and placed him on probation for a period not to exceed 3 years. Per NRS 453.3363(1), if Hohenstein fulfilled the conditions of probation, the criminal proceedings would be dismissed in accordance with NRS 453.3363(3).

On learning of Hohenstein’s arrest the WCSD suspended him and began termination proceedings, during which Hohenstein entered his guilty plea. The WCSD specified its final grounds for terminating Hohenstein, consistent with NRS 391.31297, as: (1) immorality, (2) conviction of a felony or of a crime involving moral turpitude, and (3) any cause which constitutes grounds for revocation of a teaching license.

Hohenstein sought unemployment benefits. After a hearing, the Employment Security Division (ESD) denied Hohenstein benefits on finding that his guilty plea established that the WCSD had terminated Hohenstein for “workplace misconduct,” to wit: he had committed immoral conduct under NRS 391.31297(1)(b), which disqualified him from eligibility for unemployment benefits under NRS 612.385. Hohenstein filed an unsuccessful petition for judicial review, then appealed.

The Nevada Supreme Court determined that the WCSD relied on Hohenstein’s guilty plea as grounds both for terminating him and for establishing that his termination was misconduct-based, making him ineligible for unemployment compensation. The WCSD thus equated Hohenstein’s guilty plea with a felony conviction and persuaded the ESD that Hohenstein’s termination was felony-based.

Upon review of the ESD’s decision, the Nevada Supreme Court adopted the reasoning and interpretation offered in Tate v. Board of Education of Kent County, 485 A.2d 688 (Md. Ct. Spec. App. 1985) and held that, since NRS 453.3363(4) forestalls a final judgment of conviction “for purposes of employment, civil rights or any statute or regulation or license or questionnaire or for any other public or private purpose” if the offender successfully completes probation, the guilty plea may not be used to establish misconduct based grounds for termination for purposes of denying unemployment compensation during the probationary period. The Court reversed the district court’s order denying judicial review and remanded with instructions that the district court remand to the ESD to determine, without considering Hohenstein’s guilty plea, whether the WCSD met its burden to demonstrate that Hohenstein committed disqualifying misconduct under NRS 612.385 for which he was terminated.

Is Nevada’s criminal sentencing statute unconstitutional?

Posted on by Jeff Jaeger

Pitmon v. State (Nev. Ct. App. – Mar. 26, 2015)

When a criminal defendant stands convicted of two or more felony criminal offenses and has already been sentenced to a term of imprisonment for one of those offenses, NRS 176.035(1) expressly permits a district court to order that the sentence for the second offense be imposed either concurrently or consecutively to the first sentence.

The issue is whether NRS 176.035(1) violates the Due Process Clause of the United States and Nevada Constitutions because it fails to articulate any pre-existing and reviewable criteria to guide the district court in deciding whether the second sentence should be imposed concurrently or consecutively.

Pitmon was originally charged in three separate cases with multiple counts of attempted lewdness with a child under the age of 14. The charges in two of those cases were eventually consolidated together into a single case (the first case), leaving two cases pending. Following negotiations with the district attorney, Pitmon agreed to enter a plea of guilty in each case to one count of attempted lewdness with a child under the age of 14, and all other pending charges and counts were to be dismissed after rendition of sentence.

Pitman was sentenced in the first case and received the maximum possible sentence, which was a minimum term of 8 years and a maximum term of 20 year’ imprisonment. Two days later, he appeared for sentencing in his second case and again received the maximum possible sentence. Additionally, the district judge in his second case ordered that the sentence be served consecutively to the sentence previously imposed in the first case.

Pitmon appealed arguing that NRS 176.035(1) fails to comply with the Due Process Clause because an ordinary citizen facing sentencing for different offenses cannot reasonably understand or anticipate whether the sentences are likely to be imposed concurrently or consecutively. Pitmon also contended that Nevada’s sentencing scheme is invalid because it lacks meaningful appellate review of any sentence imposed by a district court, no matter how arbitrary that sentence may have been.

Citing a Ninth Circuit case, the Nevada Court of Appeals believed that the imposition of consecutive sentences for the commission of two separate crimes would represent an outcome reasonably to be expected by persons of ordinary intelligence. See Fierro v. MacDougall, 648 F.2d 1259, 1260 (9th Cir. 1981) (concluding that, even where the legislature did not authorize the imposition of consecutive sentences, the due process clause permitted judge to impose consecutive sentences because “[t]he imposition of consecutive sentences is nothing more than the imposition, for each crime, of the sentence fixed by legislative act. Such sentencing [constitutes] literal compliance with that which the legislature has prescribed.”). Thus, the Court concluded that NRS 176.035(1) is not unconstitutionally vague in violation of the Due Process Clause of the U.S. and Nevada Constitutions.

To the extent that Pitmon asserted that his sentences were unconstitutional as applied to him, the Court concluded that the sentences imposed were not unreasonably disproportionate to the offenses to which Ptimon pleaded guilty, even though he received the maximum sentences.

Can a law firm be held liable for its client’s fraudulent transfers?

Posted on by Jeff Jaeger

Cadle Co. v. Woods & Erickson, LLP (Nev. Supreme Ct. – Mar. 26, 2015)

In 2004, Robert Krause retained the law firm Woods & Erickson, LLP, for estate planning services. The following year, Woods & Erickson created for Krause various legal entities, including an asset protection trust, into which Krause eventually transferred his assets. Meanwhile, The Cadle Company (Cadle) was attempting to collect on a California judgment against Krause. After learning of the transferred assets, Cadle sued Krause and Woods & Erickson, alleging that Krause had fraudulently transferred assets in order to escape execution of the judgment and that Woods & Erickson had unlawfully facilitated the fraudulent transfers.

The district court dismissed Cadle’s claims against Woods & Erickson without prejudice. Cadle later filed a second amended complaint asserting claims for conspiracy, aiding and abetting, and concert of action against Woods & Erickson, all arising from the fraudulent transfers.

After a bench trial, the district court found in favor of Cadle against Krause. Concluding, however, that Cadle had not shown clear and convincing evidence of Woods & Erickson’s intent to defraud or deceive, the district court entered judgment in favor of Woods & Erickson on all claims. Cadle appealed.

On appeal, Cadle argued that the district court erred because it required Cadle to show actual intent to defraud or deceive in order to establish its accessory liability claims. Woods & Erickson asserted that, regardless of intent, Nevada does not recognize common-law civil conspiracy, aiding and abetting, or concert of action in the context of fraudulent transfers.

The Nevada Supreme Court agreed with Woods & Erickson that nontransferees, i.e., those who have not received or benefited from the fraudulently transferred property, are not subject to accessory liability for fraudulent transfer claims.

The Court reasoned that creditors do not possess legal claims for damages when they are the victims of fraudulent transfers. Instead, creditors have recourse in equitable proceedings in order to recover the property, or payment for its value, by which they are returned to their pre-transfer position, pursuant to NRS 112.210 and NRS 112.220(2). Nevada law does not create a legal cause of action for damages in excess of the value of the property to be recovered. Thus, the Court concluded that Nevada law does not recognize claims against nontransferees under theories of accessory liability.

Must a court set forth specific findings to show that modifying a custodial agreement is in the best interest of the child?

Posted on by Jeff Jaeger

Bluestein v. Bluestein (Nev. Supreme Ct. – Mar. 26, 2015)

In this child custody case, the parties entered into an agreement for joint custody at the time of their divorce, and seven years later the mother requested that the district court modify the child custody designation to provide her with primary physical custody, so as to modify child support, in accordance with Rivero v. Rivero, 125 Nev. 410, 216 P.3d 213 (2009). Rivero established a formula to assist courts in determining when a joint physical custody arrangement exists by providing that if each parent had physical custody of the child at least 40 percent of the time, they shared joint physical custody.

Here, the mother requested that the district court modify the joint custody designation to provide her with primary physical custody because the father did not have the child at least 40 percent of the time under the parties’ custodial agreement. The district court granted the mother’s request based on the amount of time the father had the child each week, but failed to consider whether the modification was in the child’s best interest. The father appealed challenging the designation of the mother as the child’s primary physical custodian.

The issue is whether a district court has authority to review and modify a timeshare arrangement if the party only requests a modification to a physical custody designation.

The Court noted that the parties’ agreement to share joint physical custody controlled until the mother filed her motion requesting that the district court modify the custody agreement and designate her as the primary physical custodian. While the mother did not request a modification of the actual timeshare arrangement, by requesting a modification to the physical custody designation, the Court reasoned she was asking the district court to review the parties’ child custody agreement and apply current Nevada law. The Court concluded that once the mother filed her motion, the district court had authority to review the parties’ timeshare arrangement, determine whether the parties shared joint physical custody under Nevada law, and modify the agreement accordingly.

Therefore, the Court held that a district court has authority to review and modify a custodial agreement once a modification request is made by either party. The Court also held that the child’s best interest must be the primary consideration for modifying custody and Rivero’s 40-percent guideline shall serve as a tool in determining what custody arrangement is in the child’s best interest. Because the district court did not set forth specific findings that modifying the parties’ custodial agreement was in the best interest of the child, the Court reversed and remanded for further proceedings.

Nevada Supreme Court explores the rule against perpetuities

Posted on by Jeff Jaeger

Bullion Monarch v. Barrick Goldstrike (Nev. Supreme Ct. – Mar. 26, 2015)

Does Nevada’s Rule Against Perpetuities apply to an area-of-interest provision in a commercial mining agreement?

The Ninth Circuit Court of Appeals certified two questions to the Nevada Supreme Court concerning Nevada’s rule against perpetuities. The first question asked whether Nevada’s Rule Against Perpetuities applies to an area-of-interest provision in a commercial mining agreement. The second asked whether, if the rule applies, courts may reform such agreements under NRS 111.1039(2).

Bullion Monarch Mining, Inc. (Bullion), alleged that Barrick Goldstrike Mines, Inc. (Barrick), owes royalty payments to Bullion under an area-of-interest provision in a 1979 agreement. According to Bullion, its predecessor-in-interest entered into the agreement with a mine operator, Barrick’s predecessor-in interest, to develop Bullion’s predecessor’s mining claims in the Carlin Trend.

The area-of-interest provision required the mine operator to pay Bullion a royalty on production resulting from the operator’s mining claims that the operator might subsequently acquire within the area of interest. Under the agreement, Bullion is to receive royalty payments on production from after-acquired claims in the area of interest for 99 years

Bullion filed suit in Nevada federal district court seeking royalty payments on production from after-acquired claims in the area of interest. Barrick argued that it did not owe royalties because the area-of-interest provision was void under the rule against perpetuities. Bullion responded that the rule did not apply to area-of-interest royalty agreements. In the alternative, Bullion sought reformation of the agreement under NRS 111.1039(2).

The federal district court granted summary judgment to Barrick based on the rule against perpetuities. Bullion appealed. The Ninth Circuit Court of Appeals then certified the questions to the Nevada Supreme Court.

The Court noted that the rule against perpetuities was developed to promote public policy by ensuring that property remained alienable and that applying the rule to area-of-interest royalty agreements does not further public policy. The Court further reasoned that the Nevada Legislature has said as much by exempting commercial, nondonative transfers from the statutory rule against perpetuities. Thus, the Court held that Nevada’s common-law rule against perpetuities does not extend to area of-interest royalties created by commercial mining agreements. Since the Court answered the first question in the negative, it did not consider the second.

Do the Nevada Rules of Appellate Procedure allow for the imposition of attorney fees on a party who seeks to voluntarily dismiss a nonfrivolous writ petition after an answer has been filed?

Posted on by Jeff Jaeger

Breeden v. Eighth Jud. Dist. Ct. (Nev. Supreme Ct. – Mar. 5, 2015)

Attorney Breeden filed a petition in the Nevada Supreme Court for extraordinary writ relief, challenging a district court order adjudicating attorney liens and distributing settlement funds in a personal injury action. The real party in interest, Gonzalez, was Breeden’s former client. As ordered, Gonzalez filed an answer to Breeden’s writ petition. Breeden also had a separate contract action underway against Gonzalez and others, seeking to enforce an alleged fee-sharing agreement.

After receiving Gonzalez’s answer, Breeden decided it was more prudent to pursue the contract action than writ relief and moved to dismiss the writ petition under NRAP 42(b). Gonzalez opposed the motion. She asked that the Court resolve the petition on the merits but, if the Court does not, that it require Breeden to pay her costs and attorney fees.

The Court noted that a lawyer seeking to recover fees may proceed by separate contract action or by lien proceeding, depending on circumstances. For this reason, the Court declined to perpetuate the undecided writ proceeding if Breeden wished to abandon it in favor of his currently stayed contract action. The Court went on to decide whether it may condition the dismissal on Breeden repaying Gonzalez for the costs and attorney fees she incurred defending this now-abandoned writ petition.

Comparing NRAP 38 with Rule 38 of the Federal Rules of Appellate Procedure, which authorizes fee-shifting but limits the authorization to frivolous filings, the Court reasoned that it does not make sense to penalize a party who voluntarily dismisses a nonfrivolous appeal when, under Rule 38, the same party with the same nonfrivolous appeal would not have to pay the other side’s fees if he or she stayed with the appeal to the bitter end. Thus, the Court held that NRAP 42(b) does not provide authority for routine awards of attorney fees as a condition of voluntary dismissal, but that attorney fees may be awarded under NRAP 38 if an appeal or writ proceeding is frivolous.