Judges sue Sheriff over electronic warrants

Posted on by Jeff Jaeger

Veil v. Bennett (Nev. Supreme Ct. – Apr. 30, 2015)

Veil became Sheriff of Lyon County, Nevada in 2007. At that time, Sheriff’s Office employees entered information from all arrest warrants delivered to the Sheriff’s Office into various electronic databases. In 2009, Sheriff Veil began trying to shift part of this task to the justice courts of Lyon County. Sheriff Veil proposed that Sheriff’s Office employees continue to enter information into the databases from arrest warrants issued by the justice courts based on Sheriff’s Office investigations. Sheriff Veil further proposed, however, that the justice courts enter information into the databases from all other justice court-issued arrest warrants, such as warrants arising from defendants’ failure to appear.

The Justice of the Peace of Walker River Township agreed to this arrangement. Bennett and Vecchiarelli, Justices of the Peace of Canal Township and Dayton Township, respectively, did not. At some point, the Sheriff’s Office ceased entering information into the databases from arrest warrants issued by the justice courts that were not based on Sheriff’s Office investigations.

Acting in their official capacities as Justices of the Peace, Bennett and Vecchiarelli petitioned the district court for a writ of mandamus to compel Sheriff Veil to enter information from all arrest warrants delivered to the Sheriff’s Office into the databases. The district court granted the petition, explaining that NRS 248.100 imposed on Sheriff Veil a duty to execute warrants, and that in the modern age, this duty included entering warrant information into electronic databases. Sheriff Veil appealed.

The issue is whether NRS 248.100(1)(c), which requires sheriffs to execute warrants, also imposes upon sheriffs the duty to enter warrant information into electronic databases.

According to NRS 248.100(1)(c), “[t]he sheriff shall … execute the process, writs or warrants of courts of justice. .. when delivered to the sheriff for that purpose.” NRS Chapter 248 does not define “execute,” but Black’s Law Dictionary defines the word as “[t]o perform or complete.” In light of the plain meaning of “execute” as that term relates to arrest warrants, the Nevada Supreme Court concluded that NRS 248.100(1)(c) unambiguously requires sheriffs to arrest defendants named in arrest warrants, but imposes no duty to enter warrant information into electronic databases.

The Court noted that Sheriff Veil must act diligently in the performance of his official duties, including his duty to execute arrest warrants by arresting defendants. The Court reasoned that it is within Sheriff Veil’s discretion, however, to determine how best to execute arrest warrants under NRS 248.100(1)(c), and the district court improperly attempted to control the exercise of that discretion.

Thus, the Court determined that while entering warrant information into electronic databases may further the objectives of both law enforcement and the justice system, NRS 248.100(1)(c) neither contemplates nor assigns this task. Therefore, it is the role of the Legislature, not the court, to determine which entity is best suited to this task. Accordingly, the Court concluded that the district court abused its discretion by ordering Sheriff Veil to enter warrant information into electronic databases, and reversed the district court order granting the petition for a writ of mandamus.

Are a defendant doctor’s personal medical records privileged in a medical malpractice case?

Posted on by Jeff Jaeger

Mitchell v. Eighth Jud. Dist. Ct. (Nev. Supreme Ct. – Apr. 30, 2015)

Bunting experienced heart problems following a tonsillectomy performed by Dr. Mitchell. Bunting’s guardian ad litem, Ravella, sued Mitchell and Mitchell’s employer for medical malpractice and negligent hiring and supervision, respectively. Ravella’s complaint alleged that Mitchell’s misadministration of anesthesia during the surgery caused then-seven-year-old Bunting’s heart to fail. Bunting survived, but his heart now beats with the help of a pacemaker.

At a deposition, Mitchell admitted that at the time he operated on Bunting he was addicted to Ketamine and Valium, which he had abused intermittently for years. Mitchell denied operating on Bunting—or any patient—while under the influence of drugs or alcohol. But, three months after Bunting’s tonsillectomy, Mitchell was arrested for domestic violence while high on drugs, and three months after that, Mitchell was arrested for driving under the influence. Mitchell was convicted of both offenses. He disclosed in the deposition that, after his arrests, he and his wife pursued marriage counseling and that he was treated for substance abuse by two different doctors, first on an outpatient, then on an inpatient basis.

RaveIla posited that Mitchell was impaired when he operated on Bunting and that Mitchell’s employer should have recognized his addictive behavior and prevented him from treating patients. Seeking support for her position, Ravella subpoenaed Mitchell’s counseling and substance abuse treatment records. Mitchell objected, citing the doctor-patient and family therapist-client privileges. The district court overruled Mitchell’s privilege claims. It held that Ravella’s claims and Mitchell’s and his employer’s defenses to them placed Mitchell’s drug addiction in issue in the litigation, thereby terminating the privileges that originally attached to his communications with his doctors and with his and his wife’s family therapist. Mitchell sought an extraordinary writ directing the district court to protect as privileged counseling and medical records relating to his substance abuse.

NRS 49.225 and NRS 49.247 protect as privileged confidential communications between a patient and doctor and between clients and their marriage and family therapist. These privileges initially attached to Mitchell’s doctor-patient and marriage and family therapist-client communications. The issue is whether these confidential communications lost their privileged status when Mitchell’s drug addiction became relevant to Ravella’s malpractice and negligent hiring and supervision claims.

The Nevada Supreme Court noted that a patient who voluntarily puts his physical or mental condition in issue in a lawsuit loses the protection of the doctor-patient privilege for communications with his doctor about that condition. Referred to as waiver by placing in issue or the in-issue or at-issue waiver doctrine, this judicially developed rule promotes fairness and discourages abuse of the privilege; it prevents the patient from putting his physical or mental condition in issue and then asserting the privilege to prevent an adversary from obtaining evidence that might rebut the patient’s claim. Nevada has amended its doctor-patient privilege statutes to create an express patient-litigant exception that, depending on the form of the exception statute, directs the same or a similar result as the at-issue waiver doctrine. See NRS 49.245(3).

The Court reasoned that Mitchell did not place his drug addiction in issue in the underlying malpractice suit; Ravella did. Analyzed purely as a matter of waiver, Mitchell’s doctor-patient privilege thus remained intact and was not affected by Ravella’s malpractice and negligent supervision claims. The Court went on to consider Nevada’s statutory patient-litigant exception.

Regardless of who raised the issue of the patient’s condition, for the patient-litigant exception to apply, the party seeking to overcome the privilege still must show that the condition of the patient is an element of a claim or defense in the proceeding. The Court indicated that relevance alone does not make a patient’s condition an element of a claim or defense. At minimum, the patient’s condition must be a fact to which the substantive law assigns significance.

The Court concluded that Mitchell’s drug addiction was not an element of Ravella’s malpractice claim against him. To establish medical malpractice, a plaintiff must show that: (1) . . . the doctor’s conduct departed from the accepted standard of medical care or practice; (2) . . . the doctor’s conduct was both the actual and proximate cause of the plaintiffs injury; and (3) . . . the plaintiff suffered damages as a result. While Mitchell’s drug addiction may have been relevant, it was not an element of Ravella’s medical malpractice claim.

The Court reached the opposite conclusion with respect to Ravella’s negligent hiring and supervision claims. Unlike her malpractice claim against Mitchell, Ravella’s negligent hiring and supervision claims against his employer required her to establish that the clinic knew or should have known that Mitchell was unfit for the position he held. For the purposes of NRS 49.245(3), this made Mitchell’s condition an element of Ravella’s negligent hiring and supervision claims.

The Court conditionally granted the writ and directed the district court to review the doctor-patient records in camera and enter such orders respecting their production and use consistent with the Court’s opinion.

The Court determined that no basis existed to overcome the privilege that attached to Mitchell’s and his wife’s confidential communications with their marital and family therapist under NRS 49.247. Neither Mitchell nor his wife put their counseling sessions in issue in the litigation by RaveIla against Mitchell and Mitchell’s employer. The at-issue waiver doctrine, therefore, did not apply, for the same reasons it did not apply to Mitchell’s medical records.

Furthermore, no issue respecting the treatment provided by the Mitchells’ marital and family therapist was implicated, much less an element of a claim or defense, in this case. For that reason, the Court held that the exception did not apply and ordered the district court to grant a protective order prohibiting discovery of the Mitchells’ marriage and family therapy sessions.

Does Nevada allow deficiency judgments when a nonjudicial foreclosure sale is conducted pursuant to the laws of another state?

Posted on by Jeff Jaeger

Branch Banking v. Windhaven & Tollway, LLC (Nev. Supreme Ct. – Apr. 30, 2015)

NRS 40.455(1) permits a creditor or deed-of-trust beneficiary who is unable to fully recover its investment through foreclosure to bring an action for a deficiency judgment after the foreclosure sale or the trustee’s sale held pursuant to NRS 107.080, respectively.

The issue is whether NRS 40.455(1) precludes a deficiency judgment when the beneficiary nonjudicially forecloses upon property located in another state and the foreclosure is conducted pursuant to that state’s laws instead of NRS 107.080.

In 2007, Windhaven & Tollway, LLC, borrowed nearly $17 million from Branch Banking and Trust Company’s predecessor-in-interest. The loan was secured by various assets, including real property located in Texas. The parties agreed that Nevada law would govern the note and that the courts in Clark County, Nevada, and Collin County, Texas, would have jurisdiction over future disputes. The remaining guarantors (collectively referred to as the Guarantors) entered into a guaranty agreement to pay any debt remaining if Windhaven defaulted.

Windhaven defaulted on the loan, and Branch Banking sent it and the Guarantors a demand letter requesting repayment. Four months later, Branch Banking mailed Windhaven and the Guarantors a notice of trustee’s sale, stating that it would foreclose on the Texas property if payment was not received. Windhaven and the Guarantors failed to remit payment and the property was sold at a nonjudicial foreclosure sale under Texas law for $14,080,000. At that time, the total indebtedness remaining on the loan was $16,675,218.61. Branch Banking then sought a deficiency judgment against Windhaven and the Guarantors under Nevada law, asserting claims for breach of guaranty and breach of the implied covenant of good faith and fair dealing.

Following discovery, Branch Banking moved for summary judgment, but before the district court could rule on the motion, Windhaven and the Guarantors also moved for summary judgment, on the ground that Branch Banking’s deficiency action was precluded by NRS 40.455(1) because that statute requires all nonjudicial trustee’s sales to be conducted pursuant to NRS 107.080. The district court granted summary judgment in favor of Windhaven and the Guarantors, finding that Branch Banking’s nonjudicial foreclosure in Texas did not comply with the terms of NRS 107.080 because Branch Banking did not record a notice of breach and election to sell or provide notice in accordance with NRS 107.080. The district court also concluded that Branch Banking could have sought a deficiency judgment in Texas or conducted the Texas trustee’s sale in a manner that complied with NRS 107.080. Further, the district court ruled that because NRS 40.455(1) prohibited Branch Banking from seeking a deficiency award against Windhaven, Branch Banking could not seek a deficiency judgment against the Guarantors. Branch Banking appealed.

The parties disputed whether NRS 40.455(1)’s phrase “trustee’s sale held pursuant to NRS 107.080” permits a deficiency judgment in Nevada when a nonjudicial foreclosure takes place in another state and the beneficiary of the deed of trust does not comply with the requirements of NRS 107.080. Windhaven argued that the clause requires that a trustee’s sale comply with Nevada law before the beneficiary of the deed of trust may seek a deficiency judgment. Branch Banking argued that the clause is merely illustrative, that the statutory scheme does not support Windhaven’s interpretation, and that to interpret the statute to require out-of-state nonjudicial foreclosures to comply with NRS 107.080 would lead to absurd results.

The Nevada Supreme Court explained that NRS 40.455 governs applications for deficiency judgments by “the judgment creditor or the beneficiary of the deed of trust,” made within six months ”after the date of the foreclosure sale or the trustee’s sale held pursuant to NRS 107.080, respectively.” Because “foreclosure sale” is specifically tied to “judgment creditor,” the foreclosure sale described in the statute is a judicial foreclosure.

However, the Court did not agree that the statute limits deficiency judgments to judicial foreclosures and trustee’s sales held in accordance with NRS 107.080. NRS 40.455(1) has no such limiting language. While it clearly governs deficiencies arising from judicial foreclosures and those trustee’s sales that are held pursuant to NRS 107.080, it does not indicate that it precludes deficiency judgments arising from nonjudicial foreclosure sales held in another state.

Furthermore, common law allows a lienholder to seek a deficiency judgment against the person(s) liable on the lien, and the Court declined to interpret NRS 40.455 in such a way that would interfere with this common-law right, when the statute does not expressly limit deficiency suits arising from nonjudicial foreclosures conducted pursuant to the laws of another state.

Because NRS 40.455 does not prohibit deficiency judgment actions from being brought in Nevada when the nonjudicial foreclosure in another state did not comply with NRS 107.080, the Court concluded that the district court erred in precluding Branch Banking from pursuing a deficiency judgment against Windhaven and the Guarantors.

Does Nevada recognize a cause of action for third-party retaliatory discharge?

Posted on by Jeff Jaeger

Brown v. Eddie World, Inc. (Nev. Supreme Ct. – Apr. 16, 2015)

Brown was employed by Eddie World, Inc., as assistant manager of a candy store. The store was located on property owned by Stagecoach Hotel and Casino, Inc., and both corporations (collectively, Stagecoach) were under common ownership and management. Stagecoach knew that Brown was engaged to Allen. Brown did not allege that Stagecoach ever employed Allen. Allen filed a complaint with the Nevada Gaming Control Board (NGCB) regarding some of Stagecoach’s slot machines. Shortly after the NGCB informed Stagecoach that Allen filed the complaint, Stagecoach began assigning Brown’s job responsibilities to other employees. Within weeks, Stagecoach terminated Brown’s employment.

Brown filed a complaint in district court alleging that Stagecoach terminated her employment in retaliation for Allen’s complaint to the NGCB and that discharging her was therefore tortious and in violation of public policy. Stagecoach moved to dismiss Brown’s complaint for failure to state a claim pursuant to NRCP 12(b)(5). The district court granted Stagecoach’s motion because Nevada had not recognized a cause of action for third-party retaliatory discharge. Brown appealed.

On appeal, Brown asked the Nevada Supreme Court to recognize, for the first time, a common law cause of action for third-party retaliatory discharge.

The Court indicated that enforcing Nevada’s gaming laws is a sufficiently strong and compelling public policy to support a claim for tortious discharge. However, tortious discharge requires an employer employee relationship. Here, Brown had not alleged that Stagecoach ever employed Allen. Thus, this most basic requirement of an employment relationship involving Allen, the person whose acts led to the challenged retaliation, were not satisfied.

The Court reasoned that if it were to recognize Brown’s claim, the theory of third-party retaliatory discharge would have no logical stopping point. Allen was neither a Stagecoach employee nor under any obligation to report perceived violations of Nevada’s gaming regulations to the NGCB. Therefore, the Court declined to recognize a common law cause for third-party retaliatory discharge.

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?

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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.