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Nevada Law on Late Claims Submitted to Insurance Company

 

 Nevada Law on How an Insurance Company Must
Treat a Late Notice of Claim under Applicable Insurance Policy

 

The former Nevada rule on this issue, which was recently overturned – is based on a 1950
Nevada Supreme Court case which followed what was then the majority rule,
but which rule has since become very much the minority rule.  In State
Farm Mutual Auto Ins. Co. v. Cassinelli
, 67 Nev. 227, 247, 216 P.2d 606,
616 (1950), the Court held that:

 

By reason of the overwhelming weight of authority of the courts of last resort within the United
States, we are compelled to hold that on account of the respondent’s failure to
perform the condition precedent, stipulated in the policy as such, of giving
notice of the suit and forwarding summons and complaint within a reasonable
time, no action on his part lay against the company.  Lack of prejudice,
under the terms of the policy, was immaterial.   Id.  In other words,
where the notice was provided after the time period required by the policy, the
Court deemed this to be a failure of a condition precedent to the insurer’s
duty to provide coverage.  This rule is deemed to be the “traditional
view” or the “no prejudice required” rule, which has since been overruled in
most every other jurisdiction except for a small handful of states.  The
Nevada Supreme Court has apparently never revisited the issue since Cassinelli

 


Strong Arguments Made in 2007 Local Bar Journal and Supported by Compelling
Case Law that Nevada Will Almost Certainly Overrule Cassinelli the Next
Time it Considers the Issue

 

In a 2007 Nevada Lawyer article entitled “Special Feature: The Status of the Notice/Prejudice
Rule for Liability Insurance Claims in Nevada”, Professor Jeffrey W. Stempel
and attorney Timothy S. Menter point out that:

 "Even when Cassinelli was authored, the traditional, strict late notice defense was under
attack.  In the half-century since Cassinelli, almost all states
have adopted the view that late notice defeats insurance coverage only when the
insurer is significantly prejudiced by the late notice in terms of its ability
to investigate a loss or defend a claim.  Further, the clear majority of
states require that the insurer bear the burden to establish prejudice from
late notice, with a handful of states requiring the policyholder to prove lack
of prejudice."

 

After describing the sea change that has occurred in the various court’s decisions on this issue (i.e., requiring a showing of actual prejudice that resulted to the insurer as a
result of the late notice; aka the “notice-prejudice” rule), these commentators
conclude that:

 

"It . . . appears likely, if not certain, that if the same Nevada Supreme Court addressed
the facts of Cassinelli today, it would come to the opposite conclusion
based on the national shift in favor of a notice-prejudice rule and find that
prejudice on the part of the insurer is material and necessary for enforcement
of a notice condition."

 

While the foregoing commentators further note that while, in their view, Cassinelli
has already been implicitly overruled by “changes in the assumptions and facts
upon which Cassinelli was decided”, they also point out that there is a
further regulatory basis for attacking Cassinelli, which is based upon
the Nevada insurance regulations found at NAC 686A.600(4).  That
regulation provides:

 


  1. No insurer may, except where there is a time
    limit specified in the insurance contract or policy, require a claimant to give written notice of loss or proof of loss within a specified time or seek to relieve the insurer of the obligations if the requirement is not complied with, unless the failure to comply prejudices the insurer’s rights.

 

The Nevada Supreme
Court in 2011 follows the Majority Rule in Las
Vegas Metropolitan Police Dept. vs. Coregis Insurance Company

 

 

         
In Las Vegas Metroplitan Police Department v Coregis Insurance, 127 Nev.
Adv. Op 47, 256 P.3d 958 (2011), the police department urged the adoption of a
notice prejudice rule, which requires that in order for an insurer to deny a
claim based on late notice, it must have been prejudiced by the late
notice.  The Nevada Supreme Court agreed, and not only adopted the
notice-prejudice rule, but also placed the burden to show prejudice on the
insurance carrier.

 

         
  The court explained that it is more practical and equitable to
require the insurer to prove that it has been prejudiced than it would be to
place that burden on the insured party and require him or her to prove a
negative, namely, that the insured had not been prejudiced.  The court
also recognized that Cassinelli has since been abrogated by NAC 686A.660(4),
adopted in 1980, which states that “no insurer may, except where there is a
time limit specified in the insurance contract or policy, require a claimant to
give written notice of loss or proof of loss within a specified time or seek to
relieve the insurer of the obligations if the reauriement is not complied with,
unless the failure to comply prejudices the insurer’s rights.”

 

 

The Law in
Influential Neighboring States Follows the Modern-Majority Trend

               

               
It should be noted that some of Nevada’s influential neighbor states have long
adopted the modern notice-prejudice rule.  For example, California has
long held that:

 

[A] defense based on an insured’s failure to give timely notice [of a claim] requires the insurer to provide that it suffered actual prejudice.  Prejudice is not presumed from
delayed notice alone.  The insurer must show actual prejudice, not the
mere possibility of prejudice.  Shell Oil Co. v. Winterthur
Swiss Ins. Co.
, 12 Cal. App. 4th 715, 760-761, 15 Cal. Rptr. 2d
815, 845 (1st Dist. 1993).  Similarly, Arizona, another state
with a strong body of insurance law, has several cases wherein their courts
have held that:

 

It has long been the rule that an insurer cannot escape liability under an insurance contract due to the insured’s failure to give notice within the contract’s time limits unless
the insurer can show prejudice.

 

Salerno v. Atlantic Mut. Ins. Co., 198 Ariz. 54, 6 P.3d 758 (Ct. App. Ariz., Div. 1, 2000); citing,
inter alia,
Lindus v. Northern Ins. Co. 103 Aris. 160, 164, 438 P.2d 311, 315 (1968). 

 

By way of an example as to how Arizona might treat a case similar to ours, in Liberty
Mut. Fire. Ins. Co. v. Mandile
, 192 Ariz. 216, 222, 963 P.2d 295, 301 (App.
1997, the court held that the underinsured motorists coverage (UIM) was similar
to an excess policy (like NRM’s Frontier policy) because the “UIM claim ripens
only upon determination that the damages sustained exceed available [liability]
policy limits.”  In that case, the court found that the claim notice was
given five years and ten months after the accident.  In that case, where
the carrier argued late notice, the court held:

 

Liberty Mutual had the burden to demonstrate prejudice due to lack of notice.  Nevertheless,
Liberty Mutual did not present any evidence that, had it immediately been
informed of the accident by the insureds, it would have undertaken an
investigation of the accident.  No evidence demonstrates a policy or
practice by Liberty Mutual of conducting detailed claims investigations, hiring
accident reconstructionists, interviewing witnesses or requiring injured
claimants to submit to medical examinations in cases such as this.  Liberty
Mutual did not even subpoena the liability carrier’s investigation file.   Id. at 222-223. 

 

Recent Decisions
in other States Discussing the Development of this Area of Law

 

               
Finally, in some modern decisions considering the development of these legal
principles, the courts have been quick to point out the considerable change
that has been made in this area of the law.  In Prince George’s County,
Maryland v. Local Government Ins. Trust
, 388 Md. 162, 183, 879 A.2d 81, 93
(Md. App. 2005), the court cited the handful of cases that still held to the
traditional rule (citing, inter alia, the 1950 Cassinelli case),
and stated that “[i]n the four decades since we last considered the common law
rule, the majority “no-prejudice rule” (now “the traditional view”) that [the
prior Maryland precedent-setting case] relied upon became the minority
rule.”  (Citations omitted).  That court further noted that
“[t]hirty-eight states and two territories have adopted the “prejudice
rule”.  Id

 

Along these same lines, the court in Alcazar v. Hayes, et al., 982 S.W. 2d 845, 1998
Tenn. LEXIS 749 (Sup. Ct. Tenn. 1998), noted that:

 

[O]ur research indicates that only two states whose highest courts have considered the issue
within the last twenty years have continued to strictly adhere to the traditional approach. Id. at 852 (citing cases out of New York and Colorado). 

 

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah.  Our firm’s practice includes a strong emphasis on construction law, contracts and litigation in the jurisdictions where we are licensed.

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services.  Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation.  Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

NRCP 60(b) Motion for Relief

 

G. MARK ALBRIGHT, ESQ. (No. 001394)

D. CHRIS ALBRIGHT, ESQ. (No. 004904)

ALBRIGHT, STODDARD, WARNICK & ALBRIGHT

801 South Rancho Drive, Suite D-4

Las Vegas, Nevada  89106

Tel:      (702) 384-7111

Fax:     (702) 384-0605

gma@albrightstoddard.com

dca@albrightstoddard.com

Attorneys for Applicants/Defendants

 

IN THE SECOND JUDICIAL DISTRICT COURT OF THE
STATE OF NEVADA

 

IN AND FOR THE COUNTY OF WASHOE

 

 

JOHN
  ILIESCU, JR., et al., Applicants,

 

vs.

 

MARK
  B. STEPPAN, Respondent.

CASE NO.           CV07-00341

(Consolidated
  w/CV07-01021)

 

DEPT NO.           10

 

 

MARK
  B. STEPPAN,

 

Plaintiff,

vs.

 

JOHN
  ILIESCU, JR. and SONNIA ILIESCU, as Trustees of the JOHN ILIESCU, JR. AND
  SONNIA ILIESCU 1992 FAMILY TRUST AGREEMENT; JOHN ILIESCU, individually; DOES
  I-V, inclusive; and ROE CORPORATIONS VI-X, inclusive,

 

Defendants.

 

DEFENDANTS’
  MOTION FOR NRCP 60(b) RELIEF FROM COURT’S FINDINGS OF FACT, CONCLUSIONS OF
  LAW AND DECISION AND RELATED ORDERS

 

 



COMES NOW, John Iliescu,
Jr., individually, and, together with Sonnia Iliescu, as trustees of the John
Iliescu Jr. and Sonnia Iliescu 1992 Family Trust Agreement (sometimes jointly
hereinafter the “Iliescu Defendants” or “Movants” or “Iliescu”), as the
Defendants in the second of these two consolidated cases, and hereby move,
under NRCP 60(b), for relief from this Court’s May 28, 2014 Order setting forth
its “Findings of Fact, Conclusions of Law and Decision” (hereinafter “Decision”),
and for relief from this Court’s June 9, 2009 and May 9, 2013 summary judgment
orders which comprised part of the basis of that Decision, and for relief from
this Court’s September 5, 2014 Costs Order and September 8, 2014 Attorneys’
Fees Order, both of which also stem from the Decision.

This Motion is made and based on NRCP 60(b)(3),
on the grounds that this Court’s Decision (and the Orders on which it was in
part based, as well as the subsequent Orders based thereon) was and were
entered on the basis of misrepresentation, fraud, and other misconduct
committed by Plaintiff in conjunction with and at the direction of his former
employer such that the Decision and related Orders must be vacated and set
aside, and the Steppan lien upheld by that Decision invalidated on the grounds
set forth herein.  To the extent, if any,
necessary and applicable, this Motion is also based on NRCP 60(b)(1). This
Motion is also made and based upon all of the points and authorities set forth
herein, the exhibits referenced herein or filed herewith, all papers and
pleadings on file herein, and any argument which may be allowed at any hearing
on this Motion.

[The Points and Authorities set forth herein are
45 pages in length pursuant to this Court’s July 18, 2014 Order allowing a
post-trial brief to be filed not to exceed 45 pages.]

 

DATED this 
_____day of October, 2014.

 

 

 

By__________________________________________

G. MARK ALBRIGHT, ESQ. [NV Bar No. 001394]

D. CHRIS ALBRIGHT, ESQ. [NV Bar No.
004904]

ALBRIGHT,
STODDARD, WARNICK & ALBRIGHT

801 South Rancho Drive, Suite D-4

Las Vegas, Nevada  89106

Tel:     (702)
384-7111 /  Fax:  (702) 384-0605

gma@albrightstoddard.com

 

C. NICHOLAS PEREOS, ESQ. [NV Bar No.
000013]

1610 Meadow Wood Lane, Suite 202

Reno, Nevada 89502

Tel:     (775)
329-0678

Attorneys
for Applicants/Defendants

 

                                                    POINTS
AND AUTHORITIES

 

I.
INTRODUCTION AND OVERVIEW

This Court has ruled, in its Decision, a copy of
which is Exhibit 1 hereto, that a mechanic’s lien will be recognized in
favor of Plaintiff Mark Steppan (“ Steppan”) against the “Property” of the
Movants as defined in the Decision. 
Movants are entitled to relief from that Decision pursuant to NRCP
60(b)(3) on the grounds that said Decision was obtained by Plaintiff through
fraud, misrepresentation and misconduct. 
Indeed, the Decision and the Pre-Decision Orders and Post-Decision
Orders also sought to be overturned herein, are the result and culmination of a
long series of wrongful and fraudulent acts engaged in by Plaintiff and his
former employer beginning long before this suit was initiated and continuing
through and until the end of trial.  The
effect of these fraudulent activities has recently been clarified by the Nevada
Supreme Court in a decision entered after the trial of this matter, DTJ
Design, Inc. v. First Republic Bank
, 318 P.3d 709, 130 Nev. Adv. Op. 5
(February 13, 2014) which forms part of the basis of this post-trial motion.

Based thereon, this Court should now enter new
Decision(s) and Orders invalidating the Steppan lien, setting aside all
pre-trial orders supporting the Steppan lien, and setting aside all post-trial
costs and fees Orders against Defendants and should issue a new Decision,
followed by a Judgment thereon, in the Movants’ favor.

The present Motion is supported by the following
facts and law: Plaintiff Steppan’s Complaint initiating this lien foreclosure
action (Exhibit 3 hereto ---- the use of Exhibit Number 2 is
intentionally omitted herein) alleged in paragraph 9 that he “did supply
the services” for which his lien was claimed, which allegation was a necessary
element of his claim under NRS 108.222(1)(a) and (b)(lien amount must be based
on value of services furnished “by or through the lien claimant”).  However, this allegation was false and
Steppan did not meet his burden of proving this most fundamental element of his
claim and failed to establish an even prima facie showing that his
purported lien was truly for his services furnished “by or
through” him (i.e., “by” him or “through” his employees or his
subproviders which he had hired). 
Rather, the lien was based on work performed “by” a foreign and
unlicensed architectural firm, Fisher Friedman Associates (“FFA”), “through”
its employees, including Steppan, and through its subproviders. 

Steppan, as the only FFA employee who was licensed
in Nevada, was fraudulently treated as the purported lien claimant for FFA’s
services in order to wrongfully circumvent Nevada statutes requiring in-state
licensure/registration to practice architecture or residential design in the
State of Nevada.  NRS 623.180(1);
623.349; 623.357; 623.360.  FFA did not
want to pay the registration fees or take the other steps necessary to register
itself as a Nevada architectural firm, so it pretended that Steppan, its sole
Nevada-licensed employee, was the contract architect.  However, Nevada’s lien statutes and
architectural licensing statutes, as well as the recent Nevada Supreme Court
decision of DTJ Design, Inc. v. First Republic Bank, 318 P.3d 709, 130
Nev. Adv. Op. 5 (2014), confirm that this blatant ploy should have been
rejected, and that Steppan had no ability to lien for services which were not
actually provided by him or through his hired employees or subproviders, but
which were instead actually provided “by” the unregistered FFA firm, “through”
its hired employees and subproviders. Based thereon, this entire case, and the
decisions entered to date herein, have been based on the fraudulent activities,
the misrepresentations, and the misconduct of FFA and Steppan, including false
statements made by Steppan or on his behalf in his lien notices and in his
Complaint initiating this action, and other misrepresentations as detailed
herein.

II.    PROCEDURAL HISTORY AND OVERVIEW OF KEY
ARGUMENTS

On November 7,
2006 a mechanic’s lien notice was recorded by Plaintiff Steppan against the
Property of the Iliescu Defendants. 
Trial Exhibit (“TE”) 1 (TE 1 and 2 and 3, consisting of the Plaintiff’s
original and two amended lien notices, are Exhibits 4 and 5 and 6 hereto.)  The Property was at that time the subject of
a pending purchase agreement with a potential buyer (hereinafter “BSC/Consolidated”)
who had ostensibly retained Steppan to provide architectural services for a
planned mixed use condominium development (Wingfield Towers) at the site.  Decision at &&
5, 9, 10, 19.[1]  The Property’s owners were not parties to the
architectural contract(s).  (Decision at & 10).  The sale to the prospective purchasers who
contracted for these services never closed (Decision at &
7) and no on-site work ever commenced.

Although in Steppan’s
name, the subject lien was based on work which had been performed and invoiced
directly to the purchaser, BSC/Consolidated, in violation of NRS 623.180(1) and
NRS 623.349, by California architectural firm, FFA, which was not registered to
perform either architectural or design services in Nevada, nor owned by 2/3
Nevada licensees, in order to be so registered. 
FFA therefore utilized Steppan, its only employee with a Nevada license,
to execute the contracts (including an initial hourly fee agreement, and a
later flat-fee AIA Agreement, executed after the work was completed, as well as
certain alleged add-on work agreements). 
However, this method for circumventing Nevada’s licensing statutes was
invalid where Steppan did not own 2/3 of FFA. 
DTJ Design, Inc. v. First Republic Bank, 318 P.3d 709, 711, 130
Nev. Adv. Op. 5 (2014).

For a time after
the work began, FFA’s employees pretended to be employees of Steppan.  Ultimately, however, FFA decided that a
better sham would be to claim to be a “design consultant” for the project, a
status it claimed on an AIA Contract Addendum prepared and signed after
the work was already performed.  It is
unclear whose “design consultant” FFA was claiming, after-the-fact, to
be:  Steppan’s or the customer’s.  If FFA was claiming to be the customer’s
alleged design consultant, then Steppan had no right to lien for FFA’s work
performed directly for FFA’s own customer. 
If FFA was claiming to have been hired by Steppan as his design
consultant, then this claim should have been backed up by trial evidence, which
it most definitively was not. 

The Iliescus, as
the Property owners, filed an Application for Release of Mechanic’s Lien on
February 14, 2007, initiating this case, arguing that the lien was invalid due
to the lien claimant’s failure to provide a 31 day notice of right to lien
required by NRS 108.245, or to provide a 15 day intent to lien notice required
by NRS 108.226(6).  A hearing on this
Application led to an order for the parties to conduct further discovery.  Steppan’s initial lien was then withdrawn at
the request of the potential purchasers (Decision at &
16) to then be succeeded by a subsequent “Amended Notice and Claim of Lien”
recorded May 3, 2007 (Exh. 5).  A
separate lawsuit was then filed in the name of Steppan, on May 4, 2007, via a
complaint (Exh. 3) which listed foreclosure of a mechanic’s lien as the
only cause of action, and named only the Property’s owners (the Iliescus), not
the architect’s customer, as Defendants. 
This new suit was consolidated into the earlier case, and no final
determination was ever issued by this Court on the Iliescu Application.  Instead, the Decision was later entered in
the second consolidated suit (with Steppan as the Plaintiff, and the Iliescus
as the Defendants).

On June 22, 2009
this Court, through Judge Brent Adams, issued an Order of Partial Summary
Judgment (Exhibit 7 hereto), which excused Steppan for his failure to
ever serve the Iliescus with a 31-day pre-lien notice, as normally required by
NRS 108.245(1), invoking an exception to that statute recognized by Fondren
v. K/L Complex Ltd.
, 106 Nev. 75, 800 P.2d 719 (1990), based on a ruling
that Dr. Iliescu had “actual notice” of architectural work being performed for
the site by Steppan and “his firm” even though Steppan had no firm of “his”
own, but was the employee of the subject foreign firm, which was not registered
in Nevada.

On May 9, 2013,
another Order of Partial Summary Judgment entered (Exhibit 8 hereto)
holding  that the amount of Steppan’s
lien would be based on the flat fee percentage-based AIA Contract executed by
Steppan and FFA’s customer, after the work had been completed, but with a
back-dated effective date.  After this
Order entered, Steppan filed a pre-trial “Second Amended Notice and Claim of
Lien” on November 8, 2013 (TE 3; Exh. 6), which admitted that the AIA
Agreement had been agreed upon long after its purported effective date, and had
been utilized to retroactively “change” and dramatically increase the amounts
already previously and originally invoiced by FFA under the earlier hourly fee
agreement.

Trial was held
beginning on December 9, 2013, during which the Court declined to allow a full
presentation of evidence on the issues referenced in the two prior partial
summary judgment orders.  See, e.g.,
Trial Transcript (“TT”) at pp. 35, 722.

To
prove up a valid lien at trial, “lien claimant” and Plaintiff Steppan should
have demonstrated by a preponderance of evidence that the lien was for unpaid
amounts owed to Steppan for his services (as alleged in his
Complaint) “furnished by” him or “through” his employees or subproviders (as
required by NRS 108.222(1)(a) and (b)). 
Steppan failed to do so. 
Nevertheless, following trial this Court issued its Decision, which
upheld the lien, as this Court had apparently been misled into believing that
Steppan could be treated as though the services were performed “by” him as the
architect, “through” his design consultant, FFA.  For Steppan to meet his burden of proof under
such a theory (i.e., to show (I) that he was the true contract
architect, (II) who had retained FFA as his design consultant), Steppan
should, at minimum, have provided evidence of the following:  (I) (a) the existence of a contract between
Steppan and the customer, BSC/Consolidated, (b) negotiated by Steppan with the
customer, (c) treated as in existence in the parties’ course of dealings, such
as by having all invoices to the customer thereunder being sent by Steppan, (d)
and any payments from the customer being made to Steppan, as they would have
been to a real contract architect, (e) such that Steppan was the party owed any
past due payments claimed in his lien notices; as well as (f)
substantial material involvement by Steppan on the project, (g) including
regular communications with “his” customer, and Nevada entities, together with
(h) consistent treatment as the Nevada architect of record on Nevada
governmental submissions.  (II) Further,
the evidence which should have been expected regarding Steppan’s alleged
retention of FFA would have included: 
(i) FFA being identified as Steppan’s hired design consultant at the
location in the AIA contract where such designations are to be made (' 1.1.3.5.); (j) consistent testimony
that FFA was Steppan’s design consultant, not the customer’s, (k) backed up by
a written design agreement between FFA and Steppan, on file with Nevada’s
Architectural Board (as required by NRS 623.325 and NRS 623.353), (l) invoices
from FFA to its purported customer, Steppan, (m) payments on these invoices
from Steppan to his designer, FFA (with 1099s), (n) or, if no such payments
were made, demands or suits by FFA to Steppan regarding the same, and (o) that
Steppan had, himself, chosen and hired not only FFA, but also the other
subproviders of project services, whose bills were included in FFA’s bills and “Steppan’s”
lien.

Plaintiff
failed to meet this burden or even make a prima facie showing
thereon:  Other than (a) Steppan having
signed contracts with the customer as the nominal contract architect, no
evidence whatsoever as to items (b) through (o) was presented at trial!  Rather, the trial evidence overwhelmingly
showed that FFA was the true contract architect, by and through whose employees
the work was performed, which had negotiated the contract, improperly instructed
one of its employees to sign it as though he were the contract architect (even
though said employee would play no such actual role), invoiced and received
payments directly from the customer, with any project work done by Steppan
having been nominal and performed as an employee of FFA, with the amount of the
lien then being based entirely on amounts claimed as due and owing to FFA,
based on its invoices to the customer, and its advances to its
hired subproviders, and with no evidence showing that FFA ever entered into any
design consulting agreement with Steppan for its work or having ever acted as
though it had done so. 

FFA, not Steppan,
was the only potential claimant who could possibly have shown that it was the
party “by or through” whom the work was performed, so as to be a valid lien
claimant under NRS Chapter 108.  FFA
could not, however, bring such a lien claim due to the prohibitions of NRS
108.222(2), because FFA had not deigned to get itself licensed/registered in
Nevada to provide the services being liened for, believing itself to be above
Nevada’s laws (except when it came time to benefit from Nevada’s lien
laws).  Therefore, FFA hid the true
nature of its involvement by pretending that “Steppan” was the contract
architect, and the lien claimant. 
However, FFA had no right to engage in this subterfuge and have someone
else’s name used to pursue a lien on FFA’s behalf if that someone else was not
the party by or through whom the work was actually performed.

Plaintiff Steppan’s
failure to demonstrate that the lien was for work he performed, rather
than being based on services provided by FFA through its employees and
subproviders should have been fatal to Plaintiff’s case.  This is confirmed by DTJ Design Inc. v.
First Republic Bank
, 318 P.3d 709, 710-12, 130 Nev. Adv. Op. (2014), an
opinion issued after trial, ruling that Nevada work performed by the
foreign architectural firm DTJ Design was not lienable, because DTJ was not
registered to practice here, and its one Nevada licensed employee owned less
than two-thirds of DTJ.  This Court’s
Decision upholding the lien must therefore be corrected and the lien
invalidated.

III.   NRCP 60(b)

NRCP 60(b)(3)
allows relief from an order (or a judgment, which is not yet at issue herein)
where the same was obtained via “fraud (whether heretofore denominated
intrinsic or extrinsic), misrepresentation or other misconduct of an adverse
party.”  As this brief will demonstrate,
Steppan and his employer FFA entered into a series of sham transactions and
made a variety of misrepresentations and engaged in misconduct (including
violations of Nevada law) in order to deceive various Washoe County and Reno
entities, and this Court, culminating in this Court’s Decision, such that this
Motion is proper under NRCP 60(b)(3).  In
order to give this Court full discretion to reach a proper result herein, this
Motion is also based on NRCP 60(b)(1), for and to the extent of any excusable
inadvertence or neglect by Defendants’ counsel in failing to better assist the
Court in arriving at the proper outcome in this case, and see through the
Plaintiff’s fraud, heretofore.

An NRCP 60(b)(1)
or (3) Motion should be made within six (6) months of notice of entry of the
ruling from which relief is sought.  In
the present case, this Court’s Decision was entered less than six months ago,
on May 28, 2014.  The pretrial summary
judgment orders from which relief is sought herein were filed more than 6
months ago, but will only be rendered final and non-interlocutory by this Court’s
Decision and this Court’s final Judgment, once entered, and the post-Decision
costs and attorneys’ fees Orders were entered less than six months ago. 

In the event that
this Motion is rejected as insufficient to establish grounds for relief under
NRCP 60, no such ruling would have any effect upon the Defendants’ right to
also seek post-Judgment relief from this Court, once Judgment finally enters,
if in favor of Steppan, pursuant to NRCP 52(b) and NRCP 59(e).  Those rules allow Defendants to request that
this Court alter and amend its Judgment, and its Decision, or for a new trial,
in order to reject Steppan’s mechanic’s lien claim and his suit to foreclose
thereon as invalid, under standards which are distinct from those set forth in
NRCP 60, but such motions may not be pursued until after a judgment has
entered.  In the event that this Court
goes forward with the entry of Judgment in favor of Steppan, notwithstanding
the present motion, then nothing stated herein is intended as a waiver of the
Defendants’ rights to move for NRCP 52(b) and NRCP 59(e) relief, in a separate
motion which may include some of the same arguments set forth herein, but
presented on the grounds set forth in those rules, together with such
additional arguments or elaborations thereon as may then be appropriate.

IV.    FACTUAL ANALYSIS

 

A.        The Steppan Lien Was Based On FFA
Services and FFA Invoices, Not on Steppan’s  Services and Invoices.

“Iliescu
owned” the subject Nevada property at issue herein, as defined in the parties’
pre-trial stipulation. (Decision at &
1).  A purchase agreement was entered
into between the Iliescus as sellers, through their real estate agent Richard
Johnson, and an entity known as Consolidated Pacific Development, as purchaser,  which purchase rights later came to be held by
an entity known as BSC (jointly herein “BSC/Consolidated”).  Decision at &&
2-8.  The “sale of the property” however,
“never came to pass” as the purchasers “were never able to secure funding for
the purchase or the contemplated development.” 
Id. at &
7.  Thus, not a single shovel of dirt was
ever turned on the entire project.

An “ARCHITECTURAL
DESIGN SERVICES AGREEMENT” was executed by Steppan and BSC/Consolidated on
November 15, 2005 (TE 14; STEPPAN 4370-71; Exhibit 9 hereto) which
called for services to be performed on an hourly basis and billed monthly
(sometimes hereinafter the “original letter agreement”).  The invoices which were submitted and paid
under this original letter agreement were thereafter unilaterally and
retroactively “changed” and replaced with higher invoices from FFA (Exh. 6
at page 1, Section (1)(A)), under the purported authority of a later flat fee
percentage based AIA Agreement, which Steppan and BSC/Consolidated executed
later.  “Iliescu is not a party to the
contract
” between the architect and the customer.  Decision at &
10.  (Emphasis added.)

This
Court recognized that, although Plaintiff “Steppan is, and at all times
relevant to these proceedings was, an architect licensed to practice in the
State of Nevada” he was also “employed at all times relevant to these
proceedings by the firm of Fisher Friedman Associates (‘FFA’)” whose “offices
were in California” and that “Steppan was the only architect at FFA licensed to
practice in Nevada.”  Decision at & 9. 
(Emphasis added.)[2]  This Court also recognized that “the
[schematic design] documents were >prepared’
by a firm [FFA] other than Steppan.”  Id.
at & 13.

Significantly,
the AIA Contract, though allegedly effective October 31, 2005 (Exhibit 10
at p. Steppan-004116) was not finally agreed upon and signed, as shown by an
Addendum included therewith, until April 21, 2006 (Exh. 10 at Steppan
4127-29), which was after all of the work allegedly performed under this
AIA Agreement was already complete.  See,
e.g., Exhibit 12 hereto (relevant pages from days two through
four of Steppan’s deposition testimony)[3]
at p. 255, lines 14-21. 

The
after-the-fact Addendum indicated that the after-the-fact AIA contract was “between
BSC Financial, LLC and Mark B. Steppan, AIA, and Fisher Friedman Associates,
Design Consultants.”  Exh. 10 at
Steppan 4127.  This language is at best
ambiguous with respect to whose “Design Consultants” FFA allegedly
claimed to be, but seems to indicate that the customer had nominally hired
Steppan as its architect and also directly hired FFA as its design consultant
(as opposed to having retained Steppan, who then, in turn, retained FFA as his
design consultant).  A conclusion that
FFA was working directly for the customer is supported by Steppan’s deposition
testimony that “the reality is that both of us [FFA and Steppan] were doing the
project for the client....” See, Exh. 12 at p. 257.  This interpretation is also supported by the
lack of any evidence (as discussed more fully below) supporting any claim that
Steppan retained FFA as his subprovider design consultant.  Thus, Steppan cannot pursue a lien for FFA’s
work on a theory that the work was furnished “by” Steppan acting “through” his
hired subprovider, FFA, since FFA was instead working directly for its own
direct customer BSC/Consolidated.

FFA
presumably hoped to be treated not as the customer’s consultant, but as Steppan’s
consultant, not only to overcome the foregoing problem, but so that FFA could
claim the benefits of NRS 623.330(1) for a person acting as “a consultant
retained by a registered architect” who is exempt from the licensing provisions
of NRS Chapter 623 requiring registration with Nevada’s architectural board
before providing architectural services in Nevada.  However, FFA was clearly engaged in the practice
of architecture, as defined by NRS 623.023. 
Deceptively calling itself something other than an architect does not
mean it really was something other than an architect.  AGO 19 (4-1-1963)(draftsman may not legally
practice architecture merely by calling himself something other than an
architect.)  Moreover, FFA was clearly
working directly for the customer, and had not been “retained” by Steppan as
his consultant.

The
evidence shows that Steppan’s services were not the basis for the lien claimed
in his name.

Rather,
Steppan’s signatures on the subject agreements were a sham, used merely to
allow the real lienor in interest, FFA, whose owner’s and employees’ and
subproviders’ services comprise the basis for the lien, to improperly
circumvent several provisions of Nevada law, which prevent FFA, as a foreign
architectural firm, not registered with Nevada’s licensing Board of
Architecture (and which would not be able to be so registered as it was not
owned by at least 2/3 Nevada licensees) from performing architectural or design
services in Nevada (NRS 623.180; NRS 623.349), such that FFA could not pursue a
mechanic’s lien for those services.  NRS
108.222(2).

The
counsel retained by FFA to prosecute this lawsuit in Steppan’s name needed to
demonstrate that Steppan really was the lien claimant whose services really
comprised the basis of the lien.  Simply
put, Plaintiff “Steppan” was required to show the truth of what was alleged in
Paragraph 9 of “his” Complaint: that the lien was being pursued for services
which he (not his employer) “did supply.”  This was a required element of Steppan’s
claim under NRS 108.222(1)(a) and (b) (only the value of work performed “by or
through the lien claimant” may form the basis for a lien, for moneys which
remain due and owing to the lien claimant, not to someone else).  Steppan did not meet his burden of proving
that the work for which he liened was performed “by or through” him (i.e.,
by him or through his hired employees or his hired subproviders) and Steppan
should therefore not have prevailed, having acted merely as a non-owner
employee of FFA, which had actually done all the work on which the lien is
based.

Because
the work which forms the basis of the lien was actually performed by FFA,
through its owner and its employees (including Steppan) and its subproviders,
as invoiced by FFA directly to its customer, BSC/Consolidated, all of whose
payments for the same were paid directly to FFA, not Steppan (TT at 670-71), it
was error to allow a mechanic’s lien to stand in the name of FFA’s sole
Nevada-licensed employee.  For example,
in Nevada National Bank v. Snyder, 108 Nev. 151, 157, 826 P.2d 560,
562-64 (1992) (partially abrogated on other grounds by Executive Mgmt. Ltd.
v. Ticor Title Ins. Co.
, 118 Nev. 46, 38 P.3d 872 (2002)) the Nevada
Supreme Court reversed a district court’s decision, in a mechanic’s lien case,
allowing an individual to substitute himself in as the Plaintiff on behalf of a
foreign architectural corporation.  The
Nevada Supreme Court criticized the district court’s willingness to allow an
individual to lien for a foreign architectural firm’s work, based on a number of factors, including: (a)
after a relevant point in time, the invoices were submitted on behalf of the corporation, not the individual named as plaintiff (b) the architectural drawings were prepared by the corporation, (c) the individuals who prepared
those drawings were employees of the corporation, not of the individual
acting as plaintiff, and (d) the
individual acting as plaintiff never became separately “authorized to do
business” in Nevada.  Id.  These factors are also all true here.  As will be demonstrated below, Steppan did
not prepare the drawings or design output, FFA and its employees did.  FFA sent all of those invoices which demonstrate
the calculation of the lien amount sought, on FFA letterhead, directly to its
underlying customer (not to Steppan). 
The prior payments from that customer credited in those invoices had
been made directly to FFA, not to Steppan.  Steppan never showed he held a business
license to perform work in Nevada as a sole proprietor; etc.  That Steppan did not meet his burden of
proving that the lien was based on his services, performed “by or
through” him, is established by the following facts and analysis:

 

(i)         FFA Was Solely Owned by Rodney
Friedman, and Steppan Did Not Own 2/3 of the Entity, as Required by Nevada Law,
but Owned 0%.

Plaintiff Steppan
was deposed over the course of four days and the transcripts of those
depositions were filed with this Court on December 11, 2013.  Relevant portions of those transcripts are
attached at Exhs. 11 and Exh. 12, hereto.  As Steppan is a party in this case, these
transcripts may be utilized for “any purpose” not merely for impeachment, under
NRCP 32(a)(2) such that these transcripts are relevant primary evidence, to be
considered by this Court in establishing its rulings.

Steppan admitted
in his deposition testimony that he (FFA’s only Nevada-licensed employee) did
not own any of FFA (let alone 2/3 as required by NRS 623.349 for FFA to
provide its services in

Nevada in association with
Steppan).  Instead, Steppan’s
father-in-law[4],
Rodney Friedman, owned 100% of the corporate stock in FFA (with Mr. Fisher
having retired in 1997).  Exh. 12,
at pp. 7-13.  Friedman also himself
conceded that he was the only owner of FFA during the subject time period, such
that Steppan was merely an employee.  TT
at pp. 266, 346-347.

 

(ii)        FFA
Always Owned the Lien Claims, as Demonstrated by Who Provided the Lien Claims
to Friedman Prior to Trial.
  

After “Steppan’s” lien
was filed, but two years before trial, FFA’s sole owner, Friedman, sold the FFA
corporation to a third party.  As part of
that transfer, Friedman testified that he had retained from FFA,
ownership of the claims in this lawsuit (which contains one sole cause of
action: for lien foreclosure) such that he, as the only party known to
have “a financial interest in the outcome of this lawsuit” was therefore still “financing
this lawsuit” at the time of trial. TT at p. 348, ll.12-24.  That Friedman retained the lien foreclosure
claim at issue herein from FFA, upon the sale of FFA, not from
Steppan
, conclusively demonstrates that this claim was always known by
Friedman to be FFA’s, not Steppan’s, to begin with, such that pursuing this
claim in the name of Steppan was a fraudulent misrepresentation from the
outset.  Friedman also knew that the
architectural work product (instruments of service) prepared for the project
belonged to FFA. TT at page 369.

Thus, the subject
lien foreclosure claim at issue herein was always treated and understood as
belonging to FFA, not Steppan, until, prior to trial, that claim was
taken back from FFA, by FFA’s prior sole owner, in conjunction with a
sale of FFA.  Accordingly, as of the time
of trial, the non-Nevada licensed architect, Rodney Friedman, was the real
lienor in interest, as a successor to the non-Nevada registered architectural
firm of FFA, the original real party in interest, whose services and invoices
form the basis of the “Steppan” lien. 
Steppan’s name was utilized as the contract architect and as the lien
claimant and as the plaintiff in a manner which was a fraudulent
misrepresentation from the outset, engaged in by FFA in order to circumvent
Nevada law, which prevented FFA from suing for its invoices, let alone pursuing
a lien.  NRS 623.180, 623.357, and NRS
108.222(2).  There was however no lawful
basis for these fraudulent ploys to have been countenanced by this Court.

(iii)       The
Proposal Letter and Original Letter Agreement Contained FFA’s Information, Not
Steppan’s.

The initial
contract proposal letter ostensibly sent from Steppan to BSC/Consolidated on
October 25, 2005 (TE 9) together with the November 15, 2005 original letter
agreement (Exh. 9 hereto) signed on the basis thereof indicate that FFA
initially planned on carrying out the con that Steppan was the contract
architect by pretending that FFA’s employees worked for and as employees of
Steppan, so as to claim to be exempt from the provisions of NRS Chapter 623
pursuant to NRS 623.330(1)(a), exempting the employees of a licensed architect
or registered architectural firm from in-State licensing requirements.  Both letters attached a “2005 Master Fee
Schedule” setting forth the hourly rates for 21 different types and categories
of staff members purportedly employed by Steppan, including a “Principal/Officer”
who would charge $220.00 per hour, as well as rates for the “Executive Vice
President” the “Senior Vice President” an “Architect III” “Graphic Designer”
etc., down to clerical office support. 
However, Steppan had NO employees, let alone 21 different categories
of employees,
and never produced any W2's at trial showing that anyone was
employed by him.  Rather, as this
Court found, he was himself a paid employee of FFA throughout the time the
contract was being performed.  Exh. 1,
at p.3, _9.  Whose employees and whose rates were then
actually being included as an attachment to the letter agreement?  FFA’s, of course, NOT Steppan’s!  This demonstrates that FFA was truly the
contract architect, not Steppan, although FFA tried to hide that fact via
various acts of subterfuge, such as the use of this attachment on a letter and
contract purportedly between Steppan and the customer.

It appears that
this sham was eventually abandoned in favor of a new subterfuge, that FFA was
acting as a design consultant, so as to claim the “consultant” exemption,
instead of the employee exemption, under NRS 623.330(1)(a). The evidence at
trial clearly undercut this exemption claim (and even had it applied, this
would not mean that Steppan could lien for work performed by FFA through its
employees).

 

(iv)       All
Payments from the Customer Were Made to FFA, Not to Steppan who Admitted the
Limited Nature of His Actual Role.
 

All payments made
by the customer under the original hourly fee agreements were made to FFA, not
Steppan.  TT p. 670 at l. 18 through p.
671 at l. 3, and TT 671 at ll. 21-24.

Furthermore,
Steppan provided the following deposition testimony, reviewed at trial:  “Q. In distinguishing between required, sir,
and what you understood your role to be, was there anything, other than the
putting your stamp on documents, that was appropriate to be communicated to you
rather than someone else at Fisher-Friedman Associates? A. I’m not sure I can
think of anything in specifics, as we sit here. Q. So sitting here today, you
understandCyour
understanding of what was required of you with respect to the Reno project was
putting your stamp on documents? A. And signing of the contract. Q. Anything else?
A. Probably, but I can’t think of anything specifically.” TT at page 780.  Steppan’s counsel attempted to rehabilitate
him after introduction of this testimony, by averring that the context of the
earlier questions allegedly only had to do with communications with government
officials in Washoe County.  But even if
this were accurate, it would further emphasize the point: that Steppan, the only
FFA employee who was a Nevada licensee, was not even used to interact
with local Nevada officials, demonstrates that his name and license were
invoked merely for convenience, not in substance, and further demonstrates FFA’s
misconduct in acting as though it had the power to work in Nevada under the
guise of Steppan being the contract architect, when he clearly fulfilled no
such role.

Steppan never
performed the second half of his above-described two-part job (to stamp project
plans), since such stamping “would have occurred at submission for the building
permit at the end of the construction documents phase only” (TT at p. 785)
which never occurred.  Steppan also
averred that he had no personal liability on the project, but that FFA “would
protect me” from such liability  (Exh.
12
at p. 161), whereas an actual contract architect must alone bear “full
responsibility for the work performed” by any third party designer, not the
other way around, under NRS 623.353.

 

(v) 
      Steppan Did Not Negotiate the
Terms of the Contracts, Nor Maintain His Own Files With Respect Thereto, Nor
Create the Work Product.

Steppan did not negotiate
the terms of the contract(s) which he signed. 
Rather, Rodney Friedman negotiated the payment terms, as admitted at
trial (TT at pg. 417-418), and as recognized by this Court’s Decision, noting
that Friedman, not Steppan, had the initial contact with the client, and that
the payment terms were negotiated from that inception.  Exh. 1 at Finding 12.  This preliminary negotiation by Friedman violated
NRS 623.182
requiring a temporary certificate of registration and a warning
letter (that registration may be denied) to the potential Nevada client before
any architectural proposal can be provided by a non-Nevada registered architect

Significantly,
this was the first time Steppan’s name had ever been used on behalf of FFA
while he was employed at FFA.  Exh. 12
at pages 72-73.  This was also the first
time Steppan had signed any architectural contract, other than for one
or two spec homes in California (such that he had never signed any previous
contracts in Nevada). Id. The project number used for this contract was
an FFA number, not a Steppan numbering system number.  Exh. 12 at page 67.  The fee schedule was based on the hierarchy
within the FFA firm.  Id. at 18.

Steppan maintained
no independent files with respect to “his” contracts.  Exh. 12 at p. 304.  Rather, the approximately 7,000 exhibits
supposedly produced by Plaintiff for this case were all produced by FFA, not
Steppan. “Q. Are all of the documents that have been produced with the Steppan,
what we call Bates Number, 17 through 7,000 period, are those from the files of
Fisher Friedman Associates? A. Yes. Do you, Mark Steppan, have any separate
file with respect to the Reno project? A. No.” 
Exh. 12 at p. 304.

Steppan did not
create the contract drawings (Exh. 12 at pg. 21).  Instead, Steppan conceded that Friedman and
FFA employee David Tritt were the principal sources of design output.  Exh. 12 at pp. 256-57. Steppan was
therefore reduced to claiming that his role was one of “oversight” (id.
at pp. 21-22) even though FFA already had a project manager, Ogle, and this
role would mean Steppan was supposedly overseeing the work of his own boss, FFA
owner Friedman.

 

(vi) 
     The Initial Use of Steppan
Letterhead and Cards in Support of the Sham that Steppan Was the Contract
Architect Was Eventually Discontinued Given That the Customer Understood Who
Was Truly to be Paid for Having Done the Work.
 

Steppan admitted
that letterhead with his name displayed at the top was created solely for this
project (Exh. 12 at p. 164) which was obviously done to create the
appearance that Steppan was acting in some independent role as the project
architect even though he actually remained an employee of FFA.  This letterhead was available for anyone at
FFA to use who was working on the project (Exh. 12 at p. 165) so they
could write letters as though they were Steppan’s employees.  The use of this letterhead to perpetuate the
sham was, however, not very carefully thought through, as the letterhead
contained the FFA California address and phone number at the bottom, not
a separate Steppan number or address, or any Nevada address. TE 6.  The email at the bottom of this letterhead
was “mark@fisherfriedman.com.”  Steppan
business cards were also created in-house, at FFA  (Exh. 12 at p. 295) including, even,
for Rodney Friedman and Nathan Ogle, as though they were supposedly employed by
Steppan.  Id. 

The Steppan
letterhead was sometimes utilized by even Steppan’s father-in-law and boss,
sole FFA owner Rodney Friedman, as though he were working as an employee of
Steppan
! See, Exh. 12 at p. 255-258; and see Exhibit 13
hereto (Steppan 3262-63).  Plaintiff
admits, though, that Friedman was actually writing on behalf of FFA (Exh. 12
at p.258, ll. 6-9).  FFA employee Nathan
Ogle, listed on the invoices as the project manager, also sometimes used the
bogus Steppan letterhead to communicate with BSC/Consolidated. See, e.g.,
TE 16, discussed at TT 718.  Taken
together with the above-referenced letter contract attachment listing all of “Steppan’s”
purported categories of employees, this letterhead demonstrates that the
initial FFA plan for circumventing Nevada laws requiring FFA to be registered
here, was to pretend that all of FFA’s employees working on this Nevada
high-rise residential project were employees of Steppan.  However, this was an open and obvious
farce.  No W2's from Steppan, to his
purported employees, Friedman, Ogle, et al., were, for obvious reasons, ever
produced.  Rather, Steppan, a 0% owner of
FFA, which, through its owner and its employees was truly doing
the work for which the lien is claimed, continued to be employed by FFA
throughout the project, not the other way around.  Exh. 1 at p. 3, ll. 18-19.  The idea that Friedman and Ogle would be
submitting communications on Steppan letterhead, as though they were somehow employees
of Steppan or members of his staff, should be seen as an offensive
insult to the intelligence of anyone asked to believe therein.  Ogle was an employee of FFA.  Friedman was its owner.  Steppan was an employee of FFA, who had no
employees or office of his own. 

In any event, the
ruse of the bogus letterhead soon evaporated (probably when FFA decided to
favor the sham of a “design consultant” role, pursuant to which, its employees’
use of this letterhead would have made no sense), and FFA and its employees
eventually reverted to primarily using the accurate FFA letterhead.  For example, FFA initially utilized the
Steppan letterhead for both Services Invoices and for Reimbursable Expense
Invoices (even though these expenses were incurred by FFA, with the
subproviders FFA, not Steppan, had hired) (TT 259-263; Exh. 12 at p.85)
sent to the customer (BSC/Consolidated) in late 2005 and the first month of
2006 (see, e.g., the first four invoices attached to TE 24 and the first
four reimbursable expense invoices attached to TE 26).  However, beginning in February 2006, and
continuing through the final, February 2007, invoices, all of the invoices were
sent on FFA letterhead directly to FFA’s customer (BSC/Consolidated, not
Steppan).  See, e.g., the
remainder of TE 24, all of TE 25, and the remainder of TE 26. This means that all
of the invoices which were sent after the April 21, 2006 designation of FFA
as someone’s design consultant (Exh. 10 hereto at pp. Steppan 4127 and
4129) were sent directly from FFA, indicating that any such purported designer
role was a direct relationship between FFA and BSC/Consolidated.

In summary, none
of the invoices were sent from FFA to 
Steppan, as would be the case if FFA were a subprovider to Steppan, i.e.,
his hired design consultant. 
Rather, all invoices were sent to BSC/Consolidated, and all of the
invoices sent to that customer after the designation of FFA as someone’s design
consultant were sent on FFA letterhead, and even the initial Steppan letterhead
invoices were sent from FFA’s address. 
Thus, FFA was performing work for a Nevada client as to a Nevada project
and invoicing and being paid directly by the client for the same, all in
violation of NRS 623.180(1), rendering FFA liable for civil penalties for
violations of law.  NRS 623.365 and
623.370.

Steppan explained
that neither FFA nor its customer, BSC/Consolidated, were concerned about the
invoices suddenly being accurately sent on FFA letterhead, since they all
understood that in fact FFA, NOT Steppan, was to be paid directly for all
work.  Steppan explained that after the
FFA invoices started being sent on FFA letterhead:  “[W]e ended up having a phone conversation
with, I believe it was Sam [Caniglia, of BSC/Consolidated] . . . to discuss the
fact that he had obviously received some Fisher-Friedman invoicing versus
keeping it on Mark Steppan letterhead, was that acceptable to him, since all
parties knew the arrangement
of how I was overseeing the project as
architect of record for the purposes of license requirements in Nevada,
[but] that the payments were not coming into me directly, they were coming
into Fisher-Friedman Associates
.  So
was it acceptable to retain that way, or did he want us to change back. And it
was determined to just keep it the way it was, on Fisher-Friedman letterhead.”  TT at page 673.

Hence, the sham
pretense of acting as if the invoices were coming from Steppan, rather than
FFA, ultimately ceased because everyone knew that Steppan’s name was being
utilized solely because he was licensed in Nevada, but that FFA was truly the
party receiving direct payment for its services to Consolidated/BSC, and not
even Steppan claimed any right to receive the type of direct payments from the
customer to which an actual contract architect would be entitled
!  Just as no W2's from Steppan to Friedman or
Ogle or other FFA employees were ever produced to support the original sham
that they were Steppan’s employees, there were also never any 1099s presented
at trial from Steppan to FFA to support a claimed relationship in which Steppan
purportedly hired FFA as his design consultant.  This is because the work was not performed “by”
Steppan “through” his employees or through his consultant, but by
FFA through its employees, including Steppan, directly for the customer,
who was directly paying FFA for its services.

Steppan’s
testimony that he was “overseeing the project” is also undercut by these
invoices, as all of the invoices (TE 24, 25, and 26) list Ogle, not
Steppan, as the Project Manager (demonstrating the clerical error in this Court’s
Decision at p. 3, lines 21-23, finding that Steppan was the Project Manager,
which clerical error is another ground for relief under NRCP 60(b)). 

(vii)  
   The Lien Was Ultimately Based
Entirely on Invoices From FFA to the 
Purchaser.

FFA’s
invoicing system and department generated all invoices sent for this project
and maintained copies of the same in FFA’s files, and no separate or
independent department of Steppan’s was utilized for this task. TT
668-669.  Internal FFA decisions and
directives with respect to allocations of the time spent to various components
of the contract work, and the timing of those allocations were made by FFA, not
Steppan.  TT 669 at ll. 13-22 and TT 670
at ll. 8-17.

Significantly,
although some initial invoices were sent on sham Steppan letterhead, all of
the invoices in TE 25
are sent on FFA letterhead.  These invoices consist of much higher AIA
Contract re-billings for previously invoiced work completed under the original
hourly letter agreement, such that these invoices were sent to supersede the
earlier invoices.  The cover sheet of TE
25 demonstrates that the invoices attached to this exhibit were meant to
establish how much of the Schematic Design (ASD@) Phase of the project was complete,
for purposes of justifying a flat fee percentage amount claimed as owing based
upon that completion. The amount of the lien claim pursued at trial was based
(i) on a ruling that this SD phase had been completed (Decision at Finding 11
and Conclusion 12) and (ii) the Court’s Summary Judgment Order that the AIA
Contract controlled the calculation of the lien amount.  Thus, the lien amount ultimately sought is
based on the TE 25 invoices, which were all sent on FFA letterhead (and, like all
prior invoices, from FFA’s address, to BSC/Consolidated) based on the AIA
Agreement having been finalized before these billings were sent.  The correspondence  between the TE 25 invoices and the final lien
is demonstrated for example by a comparison of (i) the final invoice comprising
TE 25, at page Steppan-007614 (showing the total fees for “Professional
Services” earned standing at $2,070,000.00 before add-ons or payment
deductions), on the one hand, with (ii) TE 3 (the final amended lien upheld in
the Court’s Decision), on the other hand, which, at the top of page 4, likewise
shows the “Fee earned” before deductions for payments received, as
$2,070,000.00.  (The lien also claimed
additional amounts for allegedly separate add-on contracts, and reimbursable
expenses paid by FFA to its subproviders.)

This Court itself
recognized that “Steppan . . . established the billing system used by FFA
in support of his claims.  Exh. 1
at Finding 19.  All payments from Steppan’s
alleged customer for this Nevada project were paid to FFA, not to Steppan. Exh.
12
at pg. 85.  Despite such customer
payments being made and credited, not a single check was written
to Steppan by the customer.  Exh. 12
at p. 162.  The bookkeeping department at
FFA handled the billing and collections for the work of its employees, based on
the payment terms Friedman had negotiated. TT at page 417-418.  This Court’s Finding 16 indicates that “[t]here
were numerous emails sent to Caniglia and others detailing the failure to pay
the sums due.”  Notably, however, these
emails were sent, not by Steppan, but by FFA’s sole owner, Friedman. TT at pg.
381-382. 

Thus, the “Steppan”
lien was based on FFA’s invoices for fees earned and services provided by FFA
as shown by FFA invoices, on FFA letterhead (TE 25) sent by FFA, directly to FFA’s
customer for FFA’s employees’ work, with deductions for payments previously
received by FFA directly from that customer. 
Accordingly, the amount of the lien sought was based on amounts invoiced
by FFA for the work of FFA and its employees. 
Using Steppan’s name on the lien as the lien claimant was simply
fraudulent.

 

(viii)     Steppan
Acted Solely as an FFA Employee and Thus Lied In His Lien Notices Regarding By
Whom He Was Employed; He Performed Only 4.1% of the Work For Which the Lien Is
Asserted, and He Did Not Supervise the Work.

NRS 108.226(2)(c)
requires a lien notice to indicate “by whom the lien claimant was employed” in
providing the lienable services.  This
statutory provision supports the same general principle being argued throughout
this brief: a lien claimant cannot lien for someone else’s services to that
other person’s client, but may only lien for the value of services which the
lien claimant was employed to and did provide to his customer or
employer, either by providing those services himself or through others he
hired.  Steppan claimed in each of his
three lien notices (Exhs. 4, 5, and 6 hereto) that he was employed by
BSC/Consolidated. This was a fraudulent misrepresentation.   

Rather, as this
Court found in its Decision, Exh. 1 at p. 3: “Steppan was employed at all times
relevant to these proceedings by the firm of Fisher Friedman Associates (>FFA’)).”  This finding is absolutely accurate and
supported by trial admissions.  Steppan
produced no evidence at trial that any of the payments made by
BSC/Consolidated for the project were sent to him, with accompanying 1099s, to
back up the statement on his lien notice(s) that BSC/Consolidated employed him
to perform this work.  All such payments
were made to FFA.  TT at 670-71. 

Further, in his
trial testimony, Friedman inaccurately claimed that Nathan Ogle “worked
directly under Mark [Steppan]” but admitted:  “and Mark [Steppan] worked for the firm.”
 TT at pg. 265-266 [emphasis added].  Steppan received only and solely his normal
salary and wages from FFA, with no revenue sharing or expectation of a bonus,
for any work he did on this project.  Exh.
12
at pp. 85-86.  Thus,
Steppan was merely an FFA employee during the time period he worked on this
project, which means that Steppan failed to meet his burden of proof that his
lien notices were accurate in identifying, as statutorily required, by whom he
was employed.  Failure to tell the truth
with respect to the statutorily required questions, on lien notices constitutes
a misdemeanor under NRS 108.226(4).

As the trial
testimony clearly revealed, the party who was, in fact, “employed by” customer
BSC/Consolidated and expected payment from that customer for its services, was
FFA.  Steppan had no economic interest in
this contract (Exh. 12 at pp. 85-86) such that he will not share in any
recovery in this case, and has no personal economic interest herein.  Steppan never testified that he was still
owed any salary from FFA and therefore also failed to meet his burden on yet
another fundamental element of a lien claim, namely that the lien claimant
is owed money, which is what he is liening for!

Time cards were
kept for all ten architectural FFA employees, including Steppan, who worked on
the project, which cards were produced by Steppan (Exh. 12 at pp.
232-233) and are Exhibit 14 hereto (Steppan 007122-7363).  Defendant’s counsel has, for the convenience
of the Court, reviewed these time cards and created a ledger of certain
relevant calculations based thereon, which is Exhibit 15 hereto. The ten
FFA employees generated 3,396 billable hours on this matter, almost all of it
prior to the end of April 2006.  FFA’s
sole owner, Rodney Friedman, spent 813 hours, Nathan Ogle, the designated
Project Manager spent 642 hours, and designer David Tritt, 610 hours. Quan
Chang spent 206 hours and Joe Preston spent 537 hours.  Steppan, by contrast, devoted a mere 141
hours to this project, or just 4.1% of the total hours billed by all FFA
employees
, fewer than almost any other employee listed!  Exh. 14; Exh. 15.

Steppan claimed
that during this minimal hourly investment, he was involved in allegedly supervisory tasks (such
as “to walk around and talk to people. It was much easier and simple and fairly
consistent with action that I would walk around and talk to Nathan” the actual Project Manager, who billed roughly 5 times as many hours as did Steppan).
TT at p.756. However, Friedman let the truth slip out, and conceded that Steppan was not in fact supervising
the work, but would only have played a supervisory role on the project if
Friedman, FFA’s owner and the true supervisor, were to have become unavailable,
due to illness or vacation. TT 269-270.

 

(ix)       FFA
and Ogle, Not Steppan Were Listed as the Project’s Architectural Contact on
Nevada Documents, and Steppan’s Substantive Involvement, Including in Nevada,
Was Minimal.

Steppan has never
maintained an office in Nevada.  He has
never lived in Nevada and has never been a Nevada resident(as contemplated by
NRS 623.350(1)).  He has lived in
California for 26 years.  Exh. 12 at
5-6.  He admitted that he prepared no
architectural drawings for the project.  Exh.
12
at pg. 21.  Rather, the drawings
were prepared by FFA’s (not his) employees. 
Designated Project Manager Nathan Ogle (TE 24, 25, 26), who was licensed
only in California and was acting on behalf of non-Nevada registered FFA,
attended most of the Nevada meetings, worked with the government engineers and
planners, as well as with the client. 
Steppan did not create or form a Nevada business entity, but just used
his name as an individual, as though he were some sort of Nevada sole
proprietorship, to perpetuate the sham.  Exh.
12
at p.68.

Steppan’s role in
the project was so minor that his name is not even mentioned, including as the
project’s architectural contact person, in the 154 page January 17, 2006
Special Use Permit Application to the City of Reno (TE 35; TT 764,
183-84).  Instead, the Application
provides the name of the actual architectural firm:  “Person to Contact Regarding Application.
Name: Fisher Friedman Associates.  Contact:
Nathan Ogle, AIA.”  TE 35 at p. Steppan
2371.  Similarly, TE 36 (requesting an
increase in the condominium unit count) and TE 37 (for a further increase) also
list “Nathan Ogle AIA,” with FFA (not Steppan nor someone who is
with Steppan) as the architectural contact regarding the project, and do not
even mention Steppan. TT at pp. 763-764. 
The presence of FFA’s and Ogle’s names on these documents is
shocking:  What in the world was a
non-Nevada registered architectural firm and a non-Nevada licensed architect
doing putting their names as the architects of record to contact for this
Nevada project!?  This is akin to a
California lawyer, not licensed to practice law in Nevada, who doesn’t take the
steps necessary to be admitted pro hac vice, appearing on Nevada pleadings and
in Nevada courtrooms, and then claiming: “Oh, I’m not engaged in the
unauthorized practice of law in Nevada without a license, I’m just a ‘legal
consultant.’” Nevertheless, these submissions demonstrate that FFA, not
Steppan, was the true contract architect all along, and that FFA became
increasingly sloppy in trying to hide this truth.

Similarly,
an application to extend the deadline for final map submission was submitted by
the party then handling development approvals, in the name, not of Steppan, but
of Rodney Friedman.  TE 51 (at Steppan
7404); TT 320-21.  The $2,330 payment to
the City of Reno for this submission was even made by FFA/Rodney Friedman!  TE 52; TT 321-323.  This hardly seems like the act of a mere third-party
consultant to contract architect Steppan. 
Rather, as admitted by Friedman under direct examination by this Court,
Friedman did this in the hopes that he/FFA (not Steppan) could then be
paid the full contract value if the work was completed.  TT 323-325. 
This exchange between Friedman and the Court lays bare beyond any doubt
that Friedman and his company FFA were the real contract architect, and lien
claimant.  “Friedman:  I would get paid for the schematic
design, because in the terms of our agreement [i.e., the AIA
Contract which was supposedly with Steppan] if you read the abandonment clause,
I would be entitled to my compensation . . . . under contract. .
. . [p]lus the profit that I didn’t get had we[5]
completed the working drawings.” TT 325 at ll. 3-14.  (Emphasis supplied.)

Steppan
admitted that there was no reason for him to have been listed as the
architectural contact person for the project on documents submitted to Nevada
governmental officials, since (non-Nevada licensed architect) Ogle was the
project manager conducting daily operations for non-Nevada registered FFA’s
architectural work (TT at 764) and Friedman was the designer (TT at 766).  Steppan also admitted that he did not
participate directly in the requested changes of the condo unit counts (TT at
page 765) did not participate in the conversations regarding changes to project
parking (id.) did not attend any of the hearings before the Reno City
Council (TT at 769) and did not personally make any of the revisions to the FFA
firm’s instruments of service (the ultimate basis of the lien amount referenced
by this Court).  (TT at 767.) 

 

(x)        Steppan
Has No Record of Communicating With “His” Purported Client, or with Nevada
Officials.

Though there
were many emails during the course of this project from various FFA employees
to the customer BSC/Consolidated and to interested governmental entities,
Steppan could not find a single email that he had generated and sent to any
person external from FFA relating to this project. TT at 757-758.

(xi)            
FFA, Not Steppan, Chose and Hired the
Subcontractor Professionals.

Steppan had
no involvement in hiring other third party subproviders or lower tier
professionals to assist in the work. 
Rather, FFA did so, for example hiring the structural engineers and
bringing in Ron Klemencic from Seattle to assist with the structural design,
the floor to floor heights, and the column and bay spacing. TT 259-262. The
same thing occurred with the mechanical engineering, Mr. Friedman testifying
that his firm (i.e., FFA, not Steppan) hired C&B Engineers from San
Francisco, who FFA had worked with for decades, to assist with the mechanical,
electrical and plumbing. TT at pp. 262 -263. 
These entities, in turn, billed FFA (not Steppan) for their services (Exh.
12
at pg. 85) the advanced fees for which somehow nevertheless ended up as
part of “Steppan’s” lien.

 

(xii)      Any
Purported Contract Between Steppan and FFA Never Existed and Was Never Treated
By Them as Existing and Would Have Violated Nevada Law.

This Court’s Decision
found that “FFA was a design consultant on the . . . project.”  (Decision at &
12).  This Court did not indicate,
however, whose design consultant FFA purportedly was, which is a
critical question.  Nor did any
sufficient evidence support this designation.

If this Court
meant to find that FFA was hired directly by the customer, BSC/Consolidated, as
its design consultant then this Court’s Decision upholding the lien must be
quickly set aside as a matter of law, as Steppan can no more legally lien for
the work of FFA as a direct hire of the customer, than Steppan could lien for
any other third-party’s work (such as some future grader, for example, had the
sale closed and the work gone forward on-site) who was directly hired by the
customer.  If on the other hand, this
Court intended to find that FFA was Steppan’s design consultant, rather
than being hired directly by the customer, in order to justify this Court’s
ruling upholding Steppan’s lien (as though the work was done “by” Steppan “through”
Steppan’s hired design subprovider, FFA), then this Court’s Decision upholding
the lien must still be quickly set aside, both as a matter of fact and of law,
since any claim that FFA was acting in this capacity was wholly and completely
unsupported by any evidence whatsoever, and since FFA could not have so acted
without violating Nevada statutes.

First of all,
Nevada’s architecture and design licensing statutes (NRS Chapter 623) do not
even recognize the profession of “design consultant” as an existing
category.  The State Board may only issue
prescribed certificates, not make up its own. 
AGO 305 (11-24-1953).  Presumably,
foreign architectural firms also cannot make up their own bogus titles to claim
exemption from Nevada laws.  The closest
analogue to a “design consultant” which Nevada law does recognize is
a “residential designer” which may normally only provide services as to
single-family residences or multifamily construction of no more than two
stories (NRS 623.025) and may work on larger residential projects (such as
Wingfield Towers) only if under contract with a licensed Nevada architect who
is responsible for the work, which contract must be in writing, pursuant
to NRS 623.325
, and must also be on file with the Nevada Board of
Architecture
, pursuant to NRS 623.353, neither of which were shown
here.  Even then, however, the
residential designer must also itself be registered in Nevada, as
a Nevada residential designer, under NRS 623.180(1)(rendering it illegal
to perform either architecture or residential design work in
Nevada without first being registered in Nevada as an architect or a
residential designer), which was also not shown here.

NRS 623.330(1)
does allow “a consultant retained by a registered architect” to be exempt from
the registration requirements of NRS Chapter 623.  However, there is no evidence that
Steppan “retained” FFA as his consultant.  He signed no contract with FFA hiring
FFA.  Rather, although Steppan and FFA
discussed drafting such a contract they ultimately “elected there was not a need
to do one.”  Exh. 12 at p.
158.  He also paid FFA no money, and
received no invoices from FFA.  Indeed,
there was also no unwritten verbal agreement reached regarding design
consultant fees to be paid by Steppan to his purported “design consultant” FFA.
Rather, Steppan admitted that in lieu of such an arrangement, any such alleged
relationship was actually “carried out through the nature of the fact that I’m
an employee of FFA
” (not the other way around).  Exh. 11. at p. 25.  In truth, FFA worked directly for and was
paid directly by BSC/Consolidated, and the exemption of NRS 623.330(1) does not
apply.

Furthermore, it is
overwhelmingly clear that FFA’s services on this project went far beyond
outside consulting, and instead involved the practice of architecture as
defined in NRS 623.023.  For example, FFA
engaged in “rendering services” directly to its customer (with its name as the
party rendering those services on invoices and on official submissions to
Nevada governmental agencies) “the scientific, esthetic and orderly
coordination” for the “production of a completed structure which has as its
principal purpose human habitation or occupancy” and which services included
producing “plans [and] specifications” together with other architectural “advice
and direction.”  NRS 623.023. A party “cannot
legally don the robe of an architect” free from the requirements of NRS Chapter
623 “merely by refraining from calling himself an architect, if he, in fact,
accepts work which falls within the purview” of the practice of
architecture.  AGO 19 (4-1-1963). 

Even the AIA
Agreement, the first document to assert that FFA played a “design consultant” role,
does not list FFA as Steppan’s design consultant. Section 1.1.3.5 of the
agreement, which is where the “consultants retained at Architect’s expense” are
to be identified “by name” if “known,” is left blank and does not
identify FFA or any other “consultant.”  Rather, FFA first shows up as somebody’s
design consultant in the Addendum (Exh. 10 at p. Steppan4127) under language
which, as referenced above, at best indicates a direct relationship between the
customer on the one hand, and both Steppan (as the customer’s purported
architect) and FFA (as the customer’s purported design consultant) on the other
(rather than ever stating that Steppan had retained FFA). 

But the official
FFA story gets even more preposterous when one considers that this AIA
Agreement Addendum, first claiming the “design consultant” status for FFA, was
not even finalized, and signed as agreed upon until after all of the
work purportedly performed thereunder had already been completed, and the only
event relative to that work which happened thereafter was the issuance of new,
retroactive flat fee percentage based bills from FFA thereunder, intended to
supercede the original hourly based invoices which FFA had already been paid
directly under the original letter agreement. 
Exh. 12 at p. 255, lines 14-21. 
Exh. 6 at p. 1, _1(A).  Thus, FFA first did the work, and received
direct payments for the same, and only thereafter decided in what role or
capacity it should claim to have performed that work!  The true relationships, not the sham thought
up later, to circumvent Nevada law, is demonstrated by the actual course of
dealing, in which Steppan was not billed for FFA’s work, and made no payments
to FFA for the same, but rather, the underlying BSC/Consolidated customer was
billed directly by FFA, since that is the party (not Steppan) who hired
FFA and for whom FFA actually directly provided its services, which were
clearly architectural services under NRS 623.023, not mere consultant services.

Friedman testified
that for projects outside of California, “there is usually an architect of
record in that state
and then they engage us to do the
work. We are the consulting architect.” TT at page 275.  This testimony however describes an
arrangement which was never entered into with Steppan, and which, had it been
entered into, would not have been legally valid, both given the true nature of
the services provided by and payments made directly to FFA, but also as a
matter of law even had these other arrangements been properly performed.  Rather, as DTJ Design, Inc. v. First
Republic Bank
, 318 P.3d 709, 711, 130 Nev. Adv. Op. 5 (2014) recognized,
under NRS 623.349,  any association
between a foreign architectural firm and a Nevada architect to perform work
together in Nevada is only legal if the foreign firm is owned by 2/3 Nevada
licensees
(or some new entity with such ownership is formed), and having a
single Nevada licensed firm member is not enough to qualify if he owns less
than 2/3 of the firm.  Steppan was also not
an actually independent party with his own Nevada architectural business,
who could act as the Nevada architect of record and supposedly “hire” FFA as an
outside consultant, but was himself, throughout the project, a full time
employee of FFA (TT at pg. 266, Decision at p. 3, l. 17-18), holding no Washoe
County business license to act as a sole proprietorship here. 

Therefore, to the
extent that this Court’s finding was intended to conclude that FFA was Steppan’s
“design consultant” for the project, this finding was erroneously made, and
fraudulently induced given the utter and complete failure by Plaintiff to
provide any evidence whatsoever to support any such ruling, and given the law
on that subject, as recently clarified by the State Supreme Court.  Alternatively, if the Court’s finding was
meant to conclude that FFA was BSC/Consolidated’s direct design consultant then
the lien must also be set aside under that scenario, since Steppan cannot claim
a lien for work done by a party other than Steppan, directly for that other
party’s customer, who directly hired and directly paid that party to do that
work.

B.        FFA and Steppan’s Misconduct Was
Deliberate and Intentional. 

FFA and Steppan
committed multiple illegal acts in working on this Nevada project under false
pretenses, including without limitation (i) FFA’s acts in negotiating for this
work without a temporary registration or warning letter in violation of NRS
623.182; (ii) FFA’s failure to register itself in Nevada as either an
architect or a residential designer, as mandated by NRS 623.180(1),
before providing services which clearly constituted the practice of
architecture under NRS 623.023, but which were claimed to be “design” services;
(iii) FFA’s acting as the purported designer on a multi-family residence of
more than two stories (skyscraper of 40 floors) in violation of NRS 623.025;
(iv) Steppan and FFA’s association with each other on this project without
first getting Friedman a Nevada license or giving 2/3 of the stock in FFA to
Steppan, or forming a new entity for the project in which Steppan or some other
Nevada licensee was provided 2/3 of the ownership, in violation of NRS 623.349;
etc.

These violations
of Nevada law were deliberate and premeditated. 
Steppan admitted he contacted the Nevada Architectural Board, and
discussed “making Fisher Friedman of record on this job” but “we elected not
to do so because it would have required that at a minimum Rodney [Friedman] be
licensed in Nevada
” ( Exh. 12 at p. 150) (which was the case because
NRS 623.349 requires that at least 2/3 ownership of any foreign firm seeking to
register in Nevada be held by Nevada licensees, whereas Friedman, the sole owner
of FFA was not so licensed).[6]  Instead of following Nevada’s laws by getting
Friedman licensed and paying the registration fees to register FFA as an
architectural firm qualified to render services in Nevada, FFA decided to
provide its services under the sham claim that its employees were Steppan’s
employees, and then, when it came time to increase the bill for those services
after the AIA was signed, under a new sham claim, thought up after-the-fact,
that the work which had been performed prior thereto was performed in the role
of a design consultant.  FFA then set out
to benefit from the very Nevada laws which it had flouted, by improperly
pursuing a Nevada mechanic’s lien against the Property, only available by
virtue of Nevada statutes, for services performed by FFA through
its employees, in someone else’s name. 

The
fraud continued when Steppan submitted his application to renew his Nevada
license, and, instead of admitting that he was an employee of foreign firm FFA,
falsely claimed thereon that he was practicing “independently.”  See, Exhibit 16 hereto, at
Steppan 4351, and Exh. 12 at p. 144-145. 
Ironically, despite this misrepresentation, the $150 renewal fee was not
paid by Steppan, but via an FFA check signed by Friedman, based on a form sent
to Steppan at FFA.  IdSee Exhibit 17 hereto, FFA’s
November 2, 2005 check, and Exhibit 18 (the Board cover letter).

V.   
LEGAL ANALYSIS

 

A.        Because
“Steppan’s” Lien Claim Is Based Entirely on Services Performed By FFA Through
Its Employees and Subproviders It Is Invalid Under Nevada Law.

 

(i)     This Court Must Not Countenance Fraudulent
Form Over Substance Shams, Designed to Allow Their Perpetrators to Benefit From
Nevada Laws With Which They Are Not Willing to Comply.

 

The foregoing
facts are fatal to the validity of the lien erroneously upheld by this Court,
as they overwhelmingly demonstrate beyond any doubt that the lien is based
entirely on services performed by FFA through its employees
(including Steppan) and its subproviders, was recorded for the benefit
of FFA, and is in an amount which corresponds to and is solely based upon FFA
invoices sent directly by FFA to its direct customer with any payments thereon
(as credited on the invoices) from that customer having been sent directly to
FFA.  However, as FFA is not registered
as a Nevada architectural or residential design firm, FFA had no legal right to
perform this work (NRS 623.180(1)) or even to bid for this work (NRS 623.182)
and now has no right to pursue this lien. 
NRS 108.222(2).

Rather than
complying with Nevada law, FFA deliberately chose to circumvent that law under
the false pretense that Steppan, who was licensed in Nevada, was the contract
architect.  However, in its arrogant
determination that it was above Nevada’s laws, FFA only supported this
fabrication with the thinnest gloss, by having Steppan sign the architectural
contracts, and by initially sending some communications on phonied-up Steppan
letterhead.  FFA did not however bother
to actually have Steppan fill the role of a contract architect, but continued
to utilize and pay him as FFA’s employee, who was not involved to any
substantive degree in the project.  FFA
then decided, after the fact, to call itself the “design consultant” without
clarifying for whom or entering into any contract to supposedly fill this role,
and without registering as a residential designer as mandated by NRS
623.180(1).  FFA, further, directly
incurred and billed for its own expenses with its own employees and its own
subproviders (now somehow magically included as part of “Steppan’s” lien) and
directly invoiced and received direct payment from its customer.

This Court should not
continue to allow this sham form to triumph over substance.  In Snodgrass v. Immler, 194 A.2d 103
(Md. Ct. App. 1963) the court rejected and refused to uphold the same exact
type of sham arrangement on behalf of a plaintiff, who was not licensed as an
architect, but who agreed with an owner to design a building for his property,
via the owner contracting with a licensed architect, who, in turn, purportedly
employed the plaintiff to design the building. 
Even though the forms of this arrangement were much more clearly adhered
to in that matter (with the purported contract architect actually signing a
contract with the “designer” and planning to actually receive direct payment
from the customer, with which to then pay the designer), the Court nevertheless
still refused to uphold any claims based on this bogus sham:

 

Considered alone,
the contract between Immler [the licensed architect] and Kolstad [the owner], .
. . would appear to be perfectly valid since Immler was a duly licensed
architect. But when the facts surrounding this contract and its companion
contract are examined, it is at once apparent that the contracts were a
subterfuge employed in an attempt to circumvent the licensing statute.  The evidence shows that in reality it was
Snodgrass that performed the functions of an architect, and that Immler was
used as a mere strawman to allow Snodgrass to do indirectly what he could not
do directly
.

 

Id. at 106 [emphasis added].

Because the
licensed architect was “acting as a >front’
for [the unlicensed party’s] activities” the Court refused to be gullible
enough to go along, and barred any recovery arising under this “sham contract devised
in order to allow [the unlicensed party] to perform architectural services
without a license.”  Id.  This Court should also refuse to be taken in
by so obvious a sham, and look beyond the not very persuasively attempted
appearance, at the surrounding actual facts of the strawman Steppan, to reach
the same conclusion here.  Indeed, the
correctness of this conclusion is even more obvious in this case, given that
the parties hereto did not even execute the contracts or follow the payment
chains which would have been expected under their purported relationships, as
the Snodgrass parties did.  See
also
, Dalton, Dalton, Little, Inc. v. Mirandi, 412 F.Supp. 1001,
1004 (D. N.J. 1976) (ruling that contract by Maryland architect to prepare
plans for a New Jersey building was illegal, under New Jersey's architect
licensure requirements, even though the plans were sealed and certified by the
contracting party's New Jersey licensed employee, and noting that if the New
Jersey client had contracted with the New Jersey architect directly this
arrangement would still be open to attack if there were any Aissue of subterfuge, pretense or
improper circumvention of the law sufficient to warrant penetration of the form
to reach the substance.@).

The principle that
courts must place substance over sham form, is especially applicable when the
sham is created to circumvent the very Nevada laws from which a claimant then
seeks to improperly benefit.  It is thus
especially outrageous in this case that the perpetrator of this sham, who was
not willing to comply with Nevada statutes, now wishes to nevertheless take
advantage of Nevada mechanic’s lien statutes, and the benefits reserved
thereunder for those who have complied with Nevada law!  See, e.g., John v. Douglas County School Dist.,
125 Nev. 746, 753, 219 P.3d 1276 (2009) (legal doctrines do not automatically
apply to “sham” cases where a person abuses the government process in order to
achieve a legal benefit meant for a legitimate claimant.)

 

(ii)        Steppan
Failed to Meet His Burden to Prove that His Lien in His Name Was
for His Services as “He” Alleged in “His” Complaint.

The
burden of proof in a mechanic’s lien case is obviously imposed on the
Plaintiff/lien claimant.  See, e.g.,
J.D. Constr. Inc. v. IBEX Int’l Group, LLC, 126 Nev. Adv. Op. 36, 240
P.3d 1033 (2010) (even where property owner brought the lien expungement suit,
lien claimant still had duty to establish amount of his lien by preponderance
of the evidence).  NRS 623.257 provides
that no architectural or design firm may sue in Nevada if it is not registered
with Nevada’s Architectural Board.  In
order to circumvent this requirement, which FFA would not have been able to
meet, strawman Steppan was treated as the purported lien claimant and Plaintiff
herein, in whose name the lien and the suit to foreclose thereon were
filed.  “Steppan’s” Complaint alleged in
Paragraph 9 that “Plaintiff did supply the services” to the customer, for which
the lien was asserted, as referenced in Paragraph 11.  These allegations were necessary elements of
Steppan’s claim, since only the value of unpaid work “furnished . . . by or
through the lien claimant” may be pursued via a mechanic’s lien.  NRS 108.222(1)(a) and (b).  The Iliescu Defendants denied Steppan’s
paragraph 9 and the other false allegations and Plaintiff had the burden to
prove these allegations, by a preponderance of the evidence.



Steppan’s burden
of proof to show that the lien was based on services provided by or through
him, as the named lien claimant, was not remotely satisfied. Indeed, he failed
to even establish a prima facie case thereon.  Although (a) the contracts with the customer,
Consolidated/BSC, were signed by Steppan, Steppan failed to show, (b) that
Steppan had negotiated those contracts with the customer, (c) that the post AIA
Contract invoices to the customer, equating to the amount of the lien, were
sent by Steppan, (d) that the payments from the customer, credited on those
invoices, had been made to Steppan, as they would have been to a real contract
architect, (e) that Steppan was himself owed any money or had any financial
stake in “his” lien claim, (f) that Steppan was actually materially involved in
the project, (g) including based on any recorded communications with his
purported customer or with the Nevada governmental entities from which
entitlement approvals were sought, even though the whole reason for his name
being on the contract was to pretend to use his Nevada license, or (h)
that he was consistently treated as the contract architect of record such as on
submissions to Nevada governmental entities. 
Nor, in order to show that FFA was Steppan’s hired design consultant, so
as to claim that the work was performed by Steppan, through his hired
subprovider, did Steppan present:  (i)
any indication that FFA was identified at the location required on the AIA
Contract form (section 1.1.3.5.) to list known consultants, (j) clear or
consistent testimony that FFA was Steppan’s design consultant, not the customer’s,
(k) any written design agreement between FFA and Steppan (as required by NRS
623.325), on file with the Nevada Architectural Board (as required by NRS
623.353), or (l) any other evidence that he had retained FFA as his consultant
as required by NRS 623.330(1), such as invoices from FFA to its purported
customer, Steppan, (m) payments on these invoices from Steppan to his alleged
designer, FFA (with appropriate 1099s), (n) or, if no payments were made,
demands or suits from FFA to Steppan requiring such payments, or (o) that
Steppan had, himself, chosen and hired not only FFA, but also any other
subproviders whose billings are now included in the “Steppan” lien.

 

(iii)       Nevada
Case Law Clearly Demonstrates the Invalidity of Foreign Entity FFA’s Attempts
to Claim and Prosecute an Architect’s Lien By Using One of Its Nevada Licensed
Employees as the Ostensible Lien Claimant.

FFA’s theory that
it could circumvent Nevada law by utilizing its employee Steppan as the
strawman lien claimant, to pursue a lien as to work performed by FFA through
its employees, in order to benefit FFA as the real lienor and real plaintiff in
interest, has already previously been rejected by the Nevada Supreme
Court.  In Nevada National Bank v.
Snyder
, 108 Nev. 151, 157, 826 P.2d 560, 563-64 (1992) (partially abrogated
by Executive Mgmt. Ltd. v. Ticor Title Ins. Co., 118 Nev. 46, 38 P.3d
872 (2002)), the holder of an option agreement to purchase certain ranch land,
entered into a design agreement with an engineering firm to design a planned
project thereon, which engineering firm, in turn, retained “Depner Architects
& Planners, Inc.,” a foreign corporation not qualified or registered to do
business in Nevada, to provide architectural services.  When Depner Architects (the foreign
corporation) sought to pursue a lien claim against the property, and its
capacity to do so was challenged, it received district court permission to
amend its complaint to name one of the individual firm members (named Depner)
as the Plaintiff, to pursue the claim in his individual name, as though he had
performed the work as a sole proprietorship. 
The Nevada Supreme Court reversed the district court, criticized it for
having countenanced this ploy, and refused to recognize this sham, including
because “(1) after [the foreign corporation] incorporated in Washington, all
invoices were submitted . . . on behalf of the corporation; (2) the
construction drawings for the proposed project were prepared by the
corporation; (3) the individuals who worked on the drawings were employees of
the corporation” etc.  Snyder, 826
P.2d at 562.  Thus, “the district court
abused its discretion in allowing Depner [the individual] to substitute himself
as an individual for the corporate entity . . . .”  Id.

The initial issue
which prevented the foreign architectural firm from having capacity to sue in
the Snyder case was that it had failed to qualify to do business in
Nevada by registering with Nevada’s Secretary of State.  The Snyder Court did not reach the
question of whether Depner’s foreign firm was registered with the Nevada
Architectural Board, or the issues which would be raised if it were not.  The Court’s handling of the Secretary of
State qualification issue was later abrogated in Executive Mgmt. Ltd. v.
Ticor Title Ins. Co.
, 118 Nev. 46, 38 P.3d 872 (2002), which held that the
proper method for dealing with that issue is to stay cases until the
corporation complies with the requirement. 
Nevertheless, the Nevada Supreme Court’s answer to the more fundamental
question, whether a lien may be pursued by an individual for his employer’s
work has never been abrogated.  Nevada’s
licensing and registration requirements, which disqualify a foreign
architectural firm from providing services and pursuing compensation for the
same in Nevada if it is not registered with the State Architectural Board,
are separate and distinct from the process of merely qualifying a foreign
corporation to do business with Nevada’s Secretary of State.  Thus, although the barriers to FFA’s pursuit
of a lien in this case were not the same as those reached and addressed in the Snyder decision,
it was just as erroneous for this District Court, in this case, as it was for
the district court in Snyder, to allow a lien claim to be pursued in the
name of an individual employee of FFA when all the evidence demonstrated that
the foreign architectural firm was the entity whose employees had actually done
the work, and which had billed for the work and was the real lienor in
interest.  The Snyder Court’s
underlying analysis on that underlying question has not ever been altered or
abrogated.

For example, on
February 13, 2014, the Nevada Supreme Court issued its opinion in DTJ
Design, Inc. v. First Republic Bank, a Nevada Corp.
, 318 P.3d 709, 130 Nev.
Adv. Op. 5 (2014) (a copy of which is, for the Court’s convenience, attached as
Exhibit 19 hereto) in which the Court addressed other disqualifying
factors
, beyond those referenced in Snyder, which prevent foreign
architectural firms from liening for services in Nevada if they have not
registered with the Nevada Architectural Board, which opinion therefore
clarifies the limited extent of the abrogation of Snyder.

DTJ Design examined,
among other provisions, NRS 623.349, which provides the methods which FFA should
have complied with
if it wanted to be eligible to perform architectural and
design work in Nevada, with the right to bill and lien for the same, instead of
attempting a fraud and sham upon this State and this Court.  The statute indicates in pertinent part as
follows:

 

NRS 623.349  Formation of business organizations or
associations with . . . unregistered or unlicensed persons: Conditions;
limitations.

 

1.  Architects [such as Steppan], . . .
may join or form a partnership, corporation, limited‑liability company or other
business organization or association . . . with persons who are not
registered or licensed
[such as the claimed relationship between Steppan
and non-licensed entity FFA which was purportedly entered into here], if
control and two‑thirds ownership of the business organization or association is
held by persons registered or licensed in this State
pursuant to the
applicable provisions of this chapter, chapter 623A or 625 of NRS.

 

2.  If a partnership, corporation, limited‑liability
company or other form of business organization or association [such as FFA
or some joint venture entity or association it wished to form with Steppan]
wishes to practice pursuant to the provisions of this section, it must:

(a) Demonstrate to the
Board that it is in compliance with all provisions of this section.

(b) Pay the fee for a
certificate of registration pursuant to NRS 623.310.

(c)
Qualify to do business in this State.

(d)
If it is a corporation, register with the Board and furnish to the Board a
complete list of all stockholders when it first files with the Board and annually
thereafter within 30 days after the annual meeting of the stockholders of the
corporation, showing the number of shares held by each stockholder [i.e.,
to ensure the 2/3 ownership requirement is met.]

.
. . .

 

[Emphasis and bracketed explanatory language
added.]

 

The DTJ Design decision
concluded that regardless of whether a foreign architectural firm employs a
licensed Nevada architect, NRS 623.349(2) and NRS 623.357 still require
that the foreign architectural firm itself be registered in Nevada in
order for a mechanic’s lien action to be pursued on the firm’s behalf.  Id. at 711.

DTJ was a Colorado
architectural firm.  Thomas Thorpe was a
professional architect and one of DTJ’s three founding principals (but owned
less than 2/3 of the entity, just as Steppan owned 0% of FFA).  In 1998, Thorpe sought reciprocity to
practice in Nevada and submitted two applications to the state board of
architecture, one on his own individual behalf, and another on behalf of the
corporate entity, DTJ.  Only Thorpe’s
individual application was received and approved.  DTJ later recorded a notice of mechanic’s
lien against Nevada real property for unpaid architectural services, and sought
to establish that this lien had priority over an existing deed of trust
recorded by First Republic Bank.  After
an initial trial ruling had issued, upholding the validity of DTJ’s lien, but
before the value of the lien had been established, through a planned second
trial hearing, First Republic successfully moved for summary judgment, causing
the Court to reverse itself before issuing its final judgment.  The Court invalidated the lien, under NRS
623.357 which prohibited DTJ Design from maintaining its lien foreclosure
action as it had not registered with Nevada’s architectural board including
under NRS 623.349.  On appeal, the
Supreme Court upheld this ruling, noting that, under NRS 623.357 no person may
bring or maintain an action for compensation for architectural services without
first “alleging and proving that such plaintiff was duly registered under this
chapter at all times during the performance of such act or contract.”  Thus, DTJ was required to plead and prove
these required elements of a lien claim as its prima facie case, to
obtain compensation for its Nevada architectural services, regardless of the
nature of the affirmative defenses.

In reaching this decision, the DTJ Design
Court expressly ruled on and rejected many of the same arguments which FFA has
(through its surrogate Steppan) made herein. 
For example, the DTJ Court ruled that NRS 623.349(2) precluded
DTJ (as an unlicensed and unregistered firm) from foreclosing on a mechanic’s
lien for work that was allegedly performed by one of DTJ’s individual
architects, Thorpe, even though Thorpe was licensed in Nevada
.  In rejecting DTJ’s claim, the DTJ
Court pointed out that Thorpe (just like Steppan) was not a 2/3 owner of the
foreign corporation, as required by Nevada law for that entity to be allowed to
register here, in order to provide services here:

 

NRS 623.349(1) allows
registered architects to partner with unregistered architects and form a
business organization to practice in Nevada, so long as the registered
architects satisfy a two-thirds ownership requirement
.  In order for a foreign business to operate as
a separate entity in Nevada, it must satisfy the requirements found in NRS
623.349 by demonstrating to the board that registered architects within the
firm satisfy the two-thirds ownership provision
under NRS 623.349(1) and
that the business is qualified to do business in this state and has paid the
requisite registration fee under NRS 623.349(2)(a)-(c).

 

DTJ at 6.  (Emphasis added.)

Thus, even if the
Nevada Board had received DTJ’s application, it would have denied it “because
Thorpe did not satisfy the two-thirds ownership requirement” of NRS
623.349(1).  Id. Similarly, in the
present case, after Steppan contacted the Nevada Board of Architects to discuss
“making Fisher Friedman of record on this job”  FFA “elected not to do so” because “they
learned” this would require that “at a minimum Rodney [Friedman] be licensed in
Nevada” (Exh. 12 at p. 150) for the obvious reason that Friedman, as the
sole owner of FFA, would need to be individually licensed to meet the 2/3
ownership requirement.

The DTJ
Court also expressly rejected any claim that Thorpe should individually be
able to foreclose on the lien as a Nevada registered architect
: “to the
extent that DTJ argues that Thorpe should individually be able to foreclose on
the lien as a registered architect, we disagree” including because Thorpe was
not truly involved as a co-principal on the project for much of the time the
project was undertaken.  Id. at
6-7.  Steppan will no doubt argue that
this reasoning does not apply herein because Steppan, unlike Thorpe, signed the
architectural contracts.  However, this
distinction does not survive even the slightest scrutiny.  As was repeatedly admitted throughout the
trial, the actual course of dealing between the parties overwhelmingly
demonstrates that Steppan’s execution of the contract was a complete farce, and
Steppan was no more the actual contract architect in this case than Thorpe was
in the DTJ case.  Indeed, it would
be all but impossible for any reasonable and objective person to read the trial
transcript and come to any other conclusion, based on the numerous admissions
made by both Steppan and Friedman during the trial, demonstrating again and
again that the lien at issue herein was actually pursued “on behalf of” FFA.

Although Steppan,
unlike Thorpe, signed the ostensible contracts with the customer, Steppan’s
true involvement, just like Thorpe’s, was also never material, as the DTJ
court found to be the controlling question. 
Steppan spent far fewer hours on this project (only 4.1%) than did other
FFA employees, including David Tritt who produced most of the product in
conjunction with Friedman, and also including the actual project supervisor and
project manager, Friedman and Ogle. 
Steppan had no true material involvement, as any sort of principal,
therein.  Instead, the facts set forth
above clearly establish that, in reality, Steppan was no more a “contract
architect” in this case than Thorpe was in the DTJ case and any ruling
to the contrary would simply sanction FFA’s/Steppan’s fraudulent conduct.

In the present case,
FFA was not owned by any (let alone 2/3) Nevada licensees such that it would
not have been allowed to register to perform work in Nevada unless Friedman
were licensed.  He did not want to do so.  FFA therefore did not seek to become
registered with Nevada’s architectural board (either as an architect or as a
residential designer); it did not qualify itself as a foreign corporation in
Nevada; it did not execute a written contract with Steppan to provide services
as his designer as mandated by NRS 623.325 or have him file any such agreement
with the Nevada Board as mandated by NRS 623.353.  Instead, it pursued an illegal scheme which
has now been twice rejected at Nevada’s highest court, treating one of its
individual employees as though he were the lien claimant, even though multiple
facts clearly demonstrated that this was a sham, and that the foreign entity
actually performed the work, sent out direct invoices and collected fees, and
sought to benefit from foreclosing on the mechanic’s lien.

Even if the FFA
scheme were perfectly valid, it would still be the case that Steppan failed to
meet his burden of proof to show that the work which forms the basis of the
lien was performed “by or through” him. 
NRS 108.222(1)(a) and (b). 
Although his Complaint alleged that this was so, he failed to provide
evidence to support this claim.  Instead,
the evidence overwhelmingly demonstrated just the opposite: that the work was
performed “by” FFA, “through” its employees, including Steppan, who, despite
his signature on the contract(s), never acted as and was never treated as the
true contract architect, never received any of the customer’s payments, never
entered into a design agreement with FFA or filed that agreement with the
Board, never received or paid any invoices from FFA for its services, was
minimally involved in the project, and remained throughout the project as no
more and no less than FFA’s employee.

(iv)       FFA Must Not Benefit From Violating
Nevada Law.

The strategy
employed by FFA in this case is simply a less direct, more illicit and covert,
sham version, of the same strategy which DTJ employed and which Depner
employed, which the Nevada Supreme Court rejected in those two prior
cases.  Accordingly, FFA has, to date, succeeded
in getting away with violating Nevada’s architectural statutes, by being
dishonest in its pursuit of its claims, whereas DTJ and Depner were legally
prevented from having their lien claims honored, because they pursued the same
strategy as FFA, openly and honestly. 
Thus, the effect of this Court’s ruling, if it stands unaltered, will be
that dishonesty is the best policy in Nevada, and that a foreign architect who
uses a sham to circumvent Nevada’s statutes will be rewarded for taking this
false approach.   This Court must
therefore withdraw its Decision, and enter a new order to invalidate the lien,
in order to prevent this bizarre policy from being advanced, before an
erroneous judgment is entered herein. 
Doing so would be in keeping with the actions of the lower court in DTJ,
which initially upheld the validity of the DTJ lien, but then rethought this
decision, after a first trial but before subsequent proceedings and before
entering final judgment on the amount of the lien, which course reversal,
invalidating the lien for a foreign architectural firm’s services, was then the
decision which was upheld by the Nevada Supreme Court.

Nevada’s
architectural licensing statutes are aimed at protecting the Nevada public from
the risks inherent from allowing foreign architectural firms, who are unwilling
or unable to demonstrate their competence in working with local building codes
and local site conditions (through the proscribed professional in-State
registration process) from designing Nevada buildings, and to thereby “safeguard
life, health and property.”  NRS
623.010.  See, e.g., Harrie
v. Kirkham, Michael & Associates
, 179 N.W.2d 413, 415 (N.D. 1970) (AWe can find no valid reason for holding
that the profession of architecture should be treated any differently from the
professions of medicine, dentistry, or law@).  This is particularly true in high rise
projects.

The Nevada
Legislature has stated its intent to only allow firms which are registered in
Nevada and are owned by at least 2/3 licensed Nevada architects, to perform
architectural services for Nevada projects. 
Even if a firm claims it is only providing “design” services, and even
if that claim were credible, it must still be registered to do such work. NRS
623.180(1).  FFA violated these laws by
bidding on, and then performing services for a Nevada project and a Nevada
customer and then billing the customer, directly, for that work, and receiving
direct payment from that customer.  The
subject lien is all based on work which FFA performed and invoiced in violation
of Nevada law.  This Court must therefore
set aside its Decision before entry of Judgment and replace the same with
rulings which conform with and uphold Nevada law.

 

B.        Steppan Failed to Abide by Nevada’s
Mechanic’s Lien Laws and “His” Lien Would Be Invalid, Even Were it Not a Sham.

This Court should
conform with Nevada Supreme Court mandatory precedent, and reject the example
of the Snyder district court, whose ruling, allowing an individual
member of a foreign architectural firm to act as the Plaintiff in a lien
foreclosure action for that firm’s services was reversed on appeal.  This Court should instead follow the example
of the district court in the DTJ Design case, which, after initially
upholding an invalid lien based upon a foreign architectural firm’s services,
subsequently corrected itself, and, before entry of judgment, invalidated the
subject lien, which subsequent decision was upheld on appeal to the Nevada
Supreme Court.

However, if this
Court  ignores these two Nevada Supreme
Court precedents, then it should be understood that Plaintiff’s lien is also
invalid due to the many errors which the Plaintiff committed in his attempted
pursuit of the same, which errors prevented sufficiently substantial compliance
on his part, with the provisions of NRS Chapter 108, for perfecting a lien,
such that his lien must now be invalidated, even if it truly were “his” lien.  Because some of Steppan’s failures allowed
him to perpetuate his and FFA’s above-referenced fraudulent conduct (by for
example misstating the facts in his mechanic’s lien notices, and failing to
ever verify the same) these failures are appropriate for review as part of this
Motion, just as they will be appropriate for more extensive review in any
post-judgment filing.  Steppan committed
the following errors and failures in the pursuit of “his” lien:

Failure 1.  Plaintiff’s first error was failing to abide
by NRS 108.245 and never sending the Iliescus any 31-day right-to-lien notice,
so as to advise the Defendants of his purported potential lien rights. This Court
has ruled that no such notice was needed, because the Iliescu Defendants had
actual knowledge that an architect was performing work, under Fondren v. K/L
Complex Ltd.
, 106 Nev. 705, 800 P.2d 719 (1990). However, the Fondren
analysis was legally inapplicable herein, given the off-site nature of the
architectural work in question. 

As footnote 2 of
the Fondren decision notes, the reason a pre-lien notice is even
important, is because, within three days of an owner becoming aware of
construction work being performed upon her property, if she does not take steps
to protect herself by recording a notice of non-responsibility (under NRS
108.234(2)), then, under NRS 108.234(1) the “improvement constructed,
altered or repaired upon property
shall be deemed to have been
constructed, altered or repaired at the instance of each owner having or
claiming any interest therein.” This, in turn, matters, because work performed “at
the instance of the owner” is a prerequisite to lien rights under NRS
108.222(1).  However, the work at issue
in this case was off-site architectural work, which was not performed “upon”
the property.  (By contrast, in Fondren,
there was “construction on [owner Fondren’s] property” of which she was aware,
as it was regularly “inspected” on her behalf. 
Id. at 709, 721.)  Based
thereon, NRS 108.234(1) does not even apply to the facts of this case, and the Fondren
rationale collapses, since, even if Iliescu did have notice of
architectural services, those services did not involve on-site construction,
and therefore did not create a situation in which the services were statutorily
deemed to have been performed “at the instance” of Iliescu, unless timely
action was taken to avoid that result. 
Based thereon, Iliescu’s property did not suddenly become statutorily
subject to a lien upon his alleged awareness of the work being performed off
site
.  While it is true that
architects are able to lien in Nevada, that does not mean that they are always
treated equally with those whose work is performed on site, where the statutes
reference work “upon” the property.  See,
e.g.
, J.E. Dunn Northwest, Inc. v. Corus Constr. Venture, 49 P.3d
501, 508, 127 Nev. Adv. Op. 5 (2011)(rejecting architect’s argument that its
lien’s priority vested, vis-a-vis a lender’s deed of trust, before on-site
construction work had occurred, even where, as was found to be the case herein
as to the Iliescus, the bank had actual knowledge of the architect’s offsite
work, and holding instead that such knowledge was irrelevant, given the lien
priority statute’s requirement that a lien’s priority vests upon commencement
of visible on-site construction.) 
Accordingly, given that the Fondren exception to the pre-lien
notice requirement of NRS 108.245, does not apply, NRS 108.245(3) does
apply, which indicates that “[n]o [mechanic’s] lien for . . . services
performed . . . may be perfected or enforced pursuant to [the mechanic’s lien
statutes] unless the [right to lien] notice has been given [by the potential
lien claimant].”

Failures 2-4.
Plaintiff recorded his mechanic’s lien on November 7, 2006 (Exh. “4”)
which falsely identified by whom Steppan was employed; erroneously asserted
that the claimant’s off-site work had been “actually used upon the . . .
project” and had been “incorporated” therein; and sought money which was not
due to Steppan, who had been paid in full by his employer, FFA.  

Failure 5.   Furthermore, this lien notice was recorded
without first sending the 15 day notice of intent to lien, as required by NRS
108.226(6) for a project, like this one, for “multifamily . . . residences.”  When this error was asserted in the
Application for Release of Mechanic’s Lien initiating this case, Steppan
attempted a correction, sending a late intent-to-lien notice, received on March
8, 2007 before then filing a subsequent “Amended Notice and Claim of Lien” on
May 3, 2007.  (Exh. “5”).  However, as a simple matter of logic, failure
to provide required prior notice, cannot be remedied after the fact.

Failure 6.
This Amended Lien filed on May 3, 2007 lacked any verification of its contents,
under oath, by the lien claimant, or on his behalf, as required by NRS
108.226(3) which provides that the “notice of lien must be verified by the oath
of the lien claimant.”  A comparison of
the lien form contained at NRS 108.226, which “must be substantially” followed,
with this amended lien, demonstrates this error.  The statutory form sets forth the language
which is to precede the lien claimant’s (second) verifying signature: “I have
read the foregoing Notice of Lien, know the contents thereof and state that the
same is true of my own personal knowledge . . . .” which language is no where
to be found in the amended lien.  The
form also provides that the lien claimant’s [second, verifying] signature under
this language is to be notarized via a “subscribed and sworn” notary jurat (i.e.,
“sworn” to comply with the Aunder
oath” requirement.)  However, the Jurat
on Steppan’s first  amended lien
indicates only that the lien was “acknowledged” not “sworn to.”  Because verification is required precisely in
order to prevent the kind of fraud which forms the basis for this motion, this
error is appropriate for review under this NRCP 50(b)(3) motion.  This mistake is fatal.  See, e.g., Home Plumbing and
Contracting Co. v. Pruitt
, 372 P.2d 378 (N.M. 1962) (rejecting lien not
containing “any words . . . designed to operate as a verification” or any
indication that it “was in any manner sworn to@);
H.A.M.S. Co. v. Electrical Contractors of Alaska, Inc., 563 P.2d 258,
262-264 (Alaska 1977)(invalidating mechanic’s lien which, although acknowledged
to authenticate the signature, was not verified under oath by a sworn statement
of the truth of the facts stated); Mickelsen v. Craigco, 767 P.2d 561
(Utah 1989) (for a lien to be properly verified under oath A(1) there must be a correct written
oath . . . , and (2) it must be signed by the affiant in the presence of a
notary or other person authorized to take oaths, and (3) the latter must affix
a proper jurat” such as “subscribed and sworn” not merely an acknowledgment of
signature in the notary’s presence).

Failure 7.
Plaintiff’s Complaint to foreclose the lien was filed on May 4, 2007.  The first lien notice had been withdrawn
before the first amended lien notice was filed. Exh. 1 at _16.  Thus this Complaint was to foreclose the
first amended notice, and was therefore filed prematurely, only one day
after that amended lien notice, in violation of NRS 108.244, which requires a
lien claimant to wait thirty (30) days after a lien notice is recorded before
filing a lien foreclosure suit.

Failure 8.
Although Plaintiff would later try to save his lien from the violation of the
31-day right to lien notice, by alleging that one of the Defendant property
owners had knowledge of his lien, Plaintiff failed to allege in his Complaint
that either Defendant had this knowledge, which is an “essential allegation” that
must be raised in the lien foreclosure Complaint as a prerequisite to asserting
such facts, unless the owner later concedes such knowledge.  Milner v. Shuey, 57 Nev. 159, 60 P.2d
604 (1936).

Failures 9-10. Furthermore,
the filing of the Complaint was also not accompanied by the recording of a Lis
Pendens, as required by NRS 108.239(2)(a), or by publication, for three weeks,
in a local newspaper, of a “notice of foreclosure” as required by NRS
108.239(2)(b).

Failures
11-14. 
Steppan later filed yet
another amendment to his prior, error-ridden, lien notices, via a “Second
Amended Notice and Claim of Lien” recorded on the eve of trial, on November 8,
2013, some 6 years after the Second Lien notice which had been under
review in all of the prior summary judgment dispositions.  NRS 108.229 does allow liens to be amended,
to “correct or clarify the lien” with respect to matters which do not consist
of “material” or “intentional” variances, such as the property description, or
the proper name of the owner, if no prejudice will result.  NRS 108.229(1) and (3).  Plaintiff’s second amended notice did not
involve any such simple clarification, however, but materially and
substantially rewrote the entire lien claim notice, utilizing a form which was
substantially longer and more complex than the earlier notices, and which
substantially varied from the same.

Moreover, this
notice repeated several of the errors of the earlier notices.  It again inaccurately and fraudulently
asserted that Steppan was the lien claimant; and again inaccurately asserted
that he was employed by BSC/Consolidated. 

Furthermore,
although this Second Amended Lien Notice at least attempted to provide a
verification, it failed to substantially comply with the statutory requirements
for such a verification.  Instead, it
added unique terms, pursuant to which the signer, who was not Steppan but a new
attorney, not even involved years before when Steppan’s former attorney had
been originally pursuing the filings,  “verified”
the truthfulness of the lien, not on his own personal knowledge, as required,
but on the basis of his review of court pleadings from the many years since the
original lien was recorded, during a time period when the person now “verifying”
the lien would have had no first-hand knowledge whatsoever of any of the
information now supposedly being verified under his oath.  This is of obvious concern given how much of
that information, as set forth above, turned out to be inaccurate sham
information fraudulently presented, which Steppan, or someone who was in a
position to know the truth, should have been required to verify under oath, as
the statute contemplates.

 
          NRS 108.229 further
indicates that a lien may be amended only “before or during the trial of
any action to foreclose a lien.”  That is
to say: a party may not succeed at trial, and then amend its lien, after the
fact
.  This rule of law and of due
process was undercut in this case by the Plaintiff’s inappropriate trick of first
obtaining summary judgment rulings upholding certain aspects of the validity of
his lien, which were treated by this Court as binding at trial, such
that they were in many ways equivalent to the type of rulings which would
normally be obtainable after trial, and were treated as substantive post-trial
rulings,
and only thereafter creating the Second Amended Lien which this
Court’s Decision then treated as the valid final lien to be enforced under
those prior Orders
.  In other words,
the lien claimant was allowed to have its cake and eat it too, obtaining early
court orders which remained binding at trial, as to its earlier error-ridden
lien notices, and then amending its lien without prior order or permission
(pursuant to NRS 108.229(4)) as though it were still in the pre-trial period in
which amendments are allowed without an order, and then going to trial and
having its new lien upheld, on the basis of Orders issued before it even
existed.

This Court’s
orders, entered on June 22, 2009 (upholding Steppan’s lien against the pre-lien
notice challenge) and on May 9, 2013 (ruling that the later flat fee AIA
Contract would be applicable in determining the amount of the lien), were
entered, respectively, four years and six months before the lien claimant’s
lien notice was ultimately amended to create the version thereof which this
Court’s Decision upheld at page 11, lines 12-13 thereof.  This final version of the lien explained and
admitted that the AIA based-billings had “changed” earlier invoices that were
already paid, which facts were not clearly brought to the Court’s attention as
part of the record when the extremely concise summary judgment motion on that
question, referencing an earlier, much less detailed lien notice, was filed.



This was unjust,
and raises due process concerns.  When
this matter came to trial, in order to enforce NRS 108.229, which does not
contemplate that liens may be amended after trial decisions have been reached
,
either (i) the prior orders should have been set aside as no longer binding and
final given the existence of a subsequent version of the lien, or (ii) if those
earlier orders were to remain binding, then the Plaintiff’s Second Amended
Notice of Lien should have been disallowed, such that the error ridden earlier
liens needed to be defended at trial. 
Allowing the lien claimant to have it both ways, and obtain the benefit
of prior rulings at trial, as though a final post-trial adjudication had
already occurred, and nevertheless be able to file new amendments to the lien,
after those adjudications, violated the amendment timing provisions of NRS
108.229, as well as the Defendants’ due process rights to fully adjudicate and
defend the lien only in its final form.

VI.  CONCLUSION

For the reasons
set forth above, in order to comply with Nevada law, this Court’s Decision and
Judgment must be set aside, to invalidate the so-called “Steppan” lien, which
relief is appropriate on the grounds set forth herein.

DATED this 
_____day of October, 2014.

 

 

By__________________________________________

G. MARK
ALBRIGHT, ESQ. [NV Bar No. 001394]

D. CHRIS
ALBRIGHT, ESQ. [NV Bar No. 004904]

ALBRIGHT, STODDARD, WARNICK & ALBRIGHT

801 South
Rancho Drive, Suite D-4

Las
Vegas, Nevada  89106

Tel:  (702) 384-7111 / Fax:  (702) 384-0605

gma@albrightstoddard.com

dca@albrightstoddard.com

 



1Unless
otherwise noted, all paragraph references to this Court=s May 28, 2014 Decision are referring to the Findings
of Fact portion of that Decision.

 

2Steppan
was first licensed as an architect in California in 1987. He obtained his
Nevada license in 2004. TT at p. 632. He started working with FFA before
graduating in 1979 and then Astarted full time in January of 1980 with [FFA], and continued
there until the firm closed down in 2010.” TT
at page 631.  

3Because of non-sequential/duplicated page numbering in
the first and second days of Steppan=s
Deposition testimony transcripts, the relevant quoted portions of Steppan=s Deposition testimony from September 29, 2008 is made
Exhibit 11 hereto; whereas all relevant quoted portions from his
February 16, March 2, and March 3, 2010 deposition transcripts are provided as Exhibit
12
hereto.

[4]See, Exh.
12
at pp. 12-13.

5When Friedman uses Awe” in the context of this project, he means AFFA@, see, e.g., Exh. 12 at p. 258, ll 6-9.

6The former senior owner of FFA, Robert Fisher, had
been licensed in Nevada.  Exh. 12
at 33.  When Fisher left the company,
Friedman apparently wanted to continue doing Nevada work even though the firm
was no longer owned by a Nevada licensee, so he decided to just do so
dishonestly.

Personal Injury Complaint for Slip and Fall at Las Vegas Hotel

 

COMP

MARK ALBRIGHT, ESQ.

Nevada Bar No. 001394

WILLIAM H. STODDARD, JR., ESQ.

Nevada Bar No. 008679

ALBRIGHT, STODDARD, WARNICK & ALBRIGHT

801South Rancho Drive, Suite D-4

LasVegas, NV  89106

Tel:     (702) 384-7111

Fax:    (702) 384-0605

gma@albrightstoddard.com

bstoddard@alabrightstoddard.com

Attorneys
for Plaintiff

 

DISTRICT COURT

 

CLARK COUNTY, NEVADA

 

 

JACQUELINE
  CONVILLE, an individual,

 

                                    Plaintiff,

 

vs.

 

NP RED ROCK LLC,
  a Nevada limited liability company d/b/a RED ROCK CASINO RESORT &
  SPA;  DOES I through X, and ROE
  CORPORATIONS I through X, inclusive,

 

                                    Defendants.

CASE
  NO.:    

DEPT. NO.:   

 

 

COMPLAINT

 

 

 

 

            COMES NOW, Plaintiff JACQUELINE
CONVILLE, an individual (hereinafter “Plaintiff”), by and through her attorneys
of record, ALBRIGHT, STODDARD, WARNICK & WARNICK, and as and for her
Complaint against Defendant NP RED ROCK LLC, a Nevada limited liability
company, d/b/a RED ROCK HOTEL & CASINO (hereinafter “Defendant”), DOES I
through X, and ROE CORPORATIONS I through XX, inclusive, allege and aver as
follows:

JURISDICTION


  1. At all times mentioned herein, the Plaintiff was
    and is a resident of Clark County, Nevada.

  2. Upon information and belief, at all times mentioned herein, Defendant NP RED ROCK LLC was and is a Domestic Limited Liability Company, doing business under the fictitious name RED ROCK CASINO RESORT
    & SPA (hereinafter sometimes collectively “Red Rock Casino”), and is duly authorized to conduct business in the State of Nevada.

            3.         The true names and capacities, whether individual, corporate, associate or otherwise, of Defendants DOES I through X and/or ROE CORPORATIONS I through XX, inclusive, are unknown to Plaintiffs, who therefore sue said Defendants by such fictitious names.  The Plaintiffs are informed, believe and thereupon allege that the Defendants designated herein as DOES I through X and/or ROE CORPORATIONS I through XX, inclusive, are any one of the following:

                        (a)        Parties responsible in some manner for the events and happenings herein referred to that caused injuries and damages proximately thereby to the Plaintiffs as herein alleged;

                        (b)        Parties that are the agents, servants,
employees and/or contractors of the Defendants, each of them acting within the
course and scope of their agency, employment or contract;

                        (c)
       Parties that own, lease, manage,
operate, secure and/or are responsible for the premises referred to
hereinafter; and/or

                        (d)       Parties that have assumed or retained the
liabilities of any of the Defendants by virtue of an agreement, sale, transfer
or otherwise.

The Plaintiff will ask leave of the Court to amend this
Complaint to insert the true names and capacities of said Defendants, DOES I-X
and ROE CORPORATIONS I-XX, inclusive, when the same have been ascertained by
the Plaintiff, together with appropriate charging allegations, and to join said
Defendants in the action.

            4.         The acts and omissions alleged hereafter
occurred within Clark County, State of Nevada.

GENERAL ALLEGATIONS

            5.         Plaintiff repeats and realleges each
and every foregoing paragraph set forth above and incorporate the same by
reference as though fully set forth at length herein.

            6.         At all times mentioned herein,
particularly on or about September 11, 2013, the Defendants owned, operated,
possessed, controlled and/or maintained the property located at 11011 West
Charleston Boulevard, Las Vegas, Nevada 89135, commonly known as the Red Rock
Casino.

7.         On
or about September 11, 2013, Plaintiff was lawfully on the premises of Red Rock
Casino.

            8.         During the early afternoon of September
11, 2013, Plaintiff walked into the Red Rock Casino on the third level from the
East concrete parking garage of the Red Rock Casino.

            9.         As Plaintiff entered the casino, while
near the casino entrance door, Plaintiff slipped and fell on the exposed tile
elevation transition from the asphalt, landing on her elbow.

            10.       Plaintiff’s injuries included severe
injury to her elbow which shattered, back, neck and head injuries, and dental
injuries.

                                    11.
      The injury sustained by Plaintiff
required emergency medical attention.

            12.       Plaintiff
was transported via ambulance from Red Rock Casino to Summerlin Hospital, where
she received treatment for her shattered elbow and for concern about a possible
neck injury.

            13.       Plaintiff has required surgery on her
elbow and teeth as a result of her fall.

                                    14.
      As a result of Plaintiff’s injuries,
she has sustained damages in excess of $10,000.00.

            15.       Plaintiffs have been required to retain
the services of a law firm to prosecute this action and are entitled to
reasonable attorneys’ fees.

FIRST CAUSE OF ACTION

(NEGLIGENCE)

            16.       Plaintiff repeats and realleges each and
every foregoing paragraph set forth above and incorporate the same by reference
as though fully set forth at length herein.

            17.       Defendants owed Plaintiff a duty to
maintain the premises in a reasonably safe condition for use, or in the
alternative, to warn Plaintiff of any unsafe conditions.

            18.       Defendants, including their agents and/or
employees, negligently created and/or allowed an unreasonably dangerous
condition to exist and further created an unreasonable risk of harm to
Plaintiff, as well as the general public.

            19.       Defendants negligently failed to warn
Plaintiff of the unreasonably dangerous condition on its premises.



            20.       Defendants negligently supervised their
agents and/or employees responsible for designing, inspecting and/or
maintaining the premises.

            21.       Defendants owed Plaintiff a duty of care
in designing, selecting, purchasing, installing, affixing and securing a safe
entrance to the casino, and in selecting those charged with the task of
maintaining and inspecting the same.

            22.       Defendants’ improper design and
maintenance of the entrance was the proximate cause of Plaintiff’s slip and
fall, which caused the injuries she sustained.

            23.       Defendants’ improper design and
maintenance of the entrance created an unreasonably dangerous condition which
caused injury to Plaintiff.

            24.       Defendants’
improper maintenance of the entrance was a defect, such that the entrance could
not be safely used in the manner and for the purpose for which it was intended.

            25.       Defendants
owed Plaintiff a duty to exercise due care in providing a safe place for
customers to enter the casino, including by ensuring that the facilities were
safe and that the entrances were properly designed, installed, maintained,
secured, and inspected and Defendants breached their duty of care.

            26.       As
a direct and proximate result of the negligence and carelessness of the
Defendants, Plaintiff has suffered severe and serious personal injuries.

            27.      
The full nature and extent of Plaintiff’s injuries are still unknown and when
the same are ascertained, Plaintiff will assert them with particularity.

            28.       As
a direct and proximate result of Defendants’ breaches, and each of them,
Plaintiff  was seriously injured and
caused to suffer great pain of body and mind, some of which is permanent and
disabling, all to her general damages in an amount in excess of Ten Thousand
Dollars ($10,000.00).

            29.       As
a further direct and proximate result, Plaintiff incurred expenses for medical
care and treatment and will incur expenses for medical care and treatment in
the future in an amount to be proven at trial.  

            30.       As
a further direct and proximate result of the foregoing, Plaintiff has been
required to engage the services of various medical providers, including obtaining
emergency medical attention, and will continue to receive care in the
future.  

            31.       Plaintiff
is entitled to reimbursement for past and future medical bills incurred as a
result of the injuries that have caused Plaintiff’s pain and suffering.

            32.       Plaintiff
has, since the incident on September 11, 2013, experienced pain and suffering
in her elbow, and will continue to endure future pain and suffering all to her
general damages in an amount in excess of $10,000.00.

            33.       Plaintiff
has been forced to retain the services of an attorney for this action, and as
such are entitled to reasonable attorneys’ fees and litigation costs.

            WHEREFORE, Plaintiff prays for
relief and judgment against the Defendants as follows:

                                                A         General damages in an amount in excess
of Ten Thousand Dollars ($10,000.00);

                                                B.        Medical and incidental expenses incurred
and to be incurred;

                                                C.        Costs of suit, pre-judgment interest,
post-judgment interest, attorneys fees; and

                                                D.        For such other relief as is just and
proper.

           

                        DATED this _____day of
December, 2013.

 

ALBRIGHT, STODDARD,
WARNICK &ALBRIGHT

 

 

 

___________________________________________

G. MARK ALBRIGHT, ESQ.

Nevada Bar No. 001394

WILLIAM H. STODDARD, JR., ESQ.

Nevada Bar No. 008679

801 South Rancho Drive, Suite D-4

Las Vegas, Nevada 89106

(702) 384-7111

Attorneys for Plaintiff

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. The National Academy of Personal Injury Attorneys named Mark Albright as one of the Top 10 Personal Pnjury attorneys in Nevada in 2014. Our firm’s practice includes a strong emphasis on personal injury accidents. Call us at 702-384-7111.

 

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services. Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

 

Sample Motion to Compel Arbitration and Stay Litigation

 

 

Sample
Motion to Stay Litigation and Compel Arbitration

MEMORANDUM
OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS AND TO
COMPEL ARBITRATION

I. STATEMENT OF FACTS

A. The
Dispute
.

As
alleged in the Complaint, herein, LLC is governed by an Operating Agreement
entered into by all of the parties hereto and members of the LLC in _____. See,
paragraph ____ of the Complaint. The Operating Agreement establishes, among
other things, procedures and agreed upon terms for the firm’s organization, its
governance, its officers and committees, its allocations of profits and losses
and its policies regarding records and accounting. See, Complaint at
paragraph ___. Although not mentioned in the Complaint, the Operating Agreement
also contains an all compassing, binding and enforceable Arbitration Clause at
§____ which provides in pertinent part as follows:

"Disputed Matters. Except as otherwise provided in this Agreement, any controversy
or dispute arising out of this Agreement, the interpretation of any of the
provisions hereof, or the action or inaction or any Member hereunder shall be
submitted to arbitration by a single, neutral arbitrator before the American
Arbitration Association in Las Vegas, Nevada under the commercial arbitration
rules of the American Arbitration Association then in effect. Any award or
decision obtained from any such arbitration proceeding shall be final and
binding on the parties, and judgment upon any award thus obtained may be
entered in any court having jurisdiction thereof. No action at law or in equity
based upon any event arising out of or related to this Agreement shall be
instituted in any court by any Member except (a) an action to compel
arbitration pursuant to this Section, or (b) an action to enforce an award
obtained in an arbitration proceeding in accordance with this Section."

The instant dispute is an attempt by some minority shareholders to takeover a
viable and thriving company which is on the brink of closing a multi-million
dollar financing deal to complete the research and development and marketing of
valuable patent rights held by the LLC and invented by Defendant , who is the
majority shareholder in the LLC. The dependency of this litigation is a severe
impediment to the closing of the much needed financing for the LLC. Indeed, one
of the term sheets or letters of intent signed by one of several lenders, has a
face value of $85,000,000.

II. LEGAL ARGUMENT

The undersigned respectfully request that this Court compel arbitration per the agreement through the Amended Arbitration Association under its Commercial Arbitration Rules now
in effect, is appropriate as Nevada has established a policy of favoring
arbitration, the parties entered into a valid arbitration agreement, and the
arbitration clause contained in the Operating Agreement is clear and
unambiguous. Moreover, none of the parties have waived the opportunity to
arbitrate. As such, this Court should compel arbitration.

B. The Arbitration Clause is Valid and Enforceable.

Applying Nevada substantive law, the arbitration clause in the Operating Agreement is
valid and enforceable. Both the Nevada Legislature and Nevada Supreme Court
support the enforcement of arbitration provisions for alternative dispute
resolution in Nevada.The Nevada Arbitration Act recognizes that a written
provision in a contract to submit any existing controversy to arbitration is
valid, enforceable and irrevocable. NRS 38.219.1.

“On motion of a person showing an arbitration agreement and alleging another
person's refusal to arbitrate pursuant to the agreement... the court shall
proceed summarily to decide the issue and order the parties to arbitrate
unless it finds that there is no enforceable agreement to arbitrate.” NRS
38.221.1(b) (emphasis added).

Nevada courts have uniformly held that agreements to arbitrate are specifically
enforceable. Silverman v. Fireman's Fund Ins. Co., 96 Nev. 30, 604 P.2d 805 (1980). Any doubts concerning the arbitrability of the subject matter of the disputes are to be
resolved in favor of arbitration. Exber, Inc. v. Sletten Const. Co., 92 Nev. 721, 558 P.2d 517 (1976). In the absence of the most forceful evidence of the purpose to exclude a claim from
arbitration, the claim is properly submitted to arbitration. Clark County Public Employees v. Pierson, 106 Nev. 587, 798 P.2d 136 (1990).

The Nevada Supreme Court has further indicated that the parties are not to be
deprived by the Court of the benefit of Arbitration, and any doubt is to be
resolved in favor of arbitration. Exber, Inc. V. Sletten Construction Co.,
92 Nev. 721, 528 P.2d 517 (1976).

All doubts concerning the arbitrability of the subject matter of the dispute are to
be resolved in favor of arbitration. Once it is determined that
an arbitrable issue exists, the parties are not to be deprived by the courts of
the benefits of arbitration, for which they bargained - speed and the
resolution of the dispute and the employment of the specialized knowledge and
competence of the arbitrator. Id. At 729, 558 P.2d 517. (Emphasis
added).

In this case, the parties entered into a Operating Agreement that clearly established
arbitration as the forum for dispute resolution. See Exhibit 1, §14.9.
Further, the parties agreed arbitration would “be final and binding.” See
Exhibit 1, §14.9. As such, the parties entered into a valid and enforceable
arbitration clause that should require the arbitration of the current dispute.

To gain exemption from arbitration, it must be specifically and expressly provided in
the Operating Agreement that a particular grievance is exempted from
arbitration. Clark County Public Employees v. Pierson, 106 Nev. 587,
591, 798 P.2d 136 (1990). In the absence of the most forceful evidence of the
purpose to exclude a claim from arbitration, the claim is properly
submitted to Arbitration.
Id. Therefore, both the Nevada
Legislature and the Nevada Supreme Court agree - agreements to arbitrate
should be specifically enforced
.

The clause in this case expressly covers “any controversy or dispute,” including
any dispute relating to or arising out of “the action or inaction of any
member.” The clause further bars litigation by stating that “no action at law
or in equity shall be instituted in any court by any member,” except to compel
arbitration or to enforce an arbitration award.

C. The Contract is Clear and Unambiguous.

The Operating Agreement between Plaintiffs and Defendants clearly and unambiguously
requires arbitration for all disputes. Nevada Courts consistently enforce unambiguous contracts according to their plain language. Renshaw v. Renshaw, 96 Nev. 541, 611 P.2d 1070 (1980). Courts are bound by language that is clear and free of ambiguity and cannot, using the guise of interpretation, distort the plain meaning of the agreement. Watson v. Watson, 95 Nev. 495, 496 P.2d 507 (1979).

In this case, there is no doubt the parties agreed to a clear and unambiguous
requirement to arbitrate. The arbitration provision is clearly marked in the
Operating Agreement. See Exhibit 1 at §14.9. Moreover, the language
clearly evidences an agreement to arbitrate disputes arising from the actions
or inactions of Members. Id. Finally, it is clear from the language of
the contract that the parties intended arbitration to be “final and binding.”
As such, the contract clearly and unambiguously requires that the parties
arbitrate this dispute and this Court should enforce the clear language of the
Operating Agreement between the parties. See, e.g., Southern
Trust Mortgage Co. V. Kay & Door Co., Inc
., 104 Nev. 564, 763 P.2d 353
(1988) (holding that where a document is clear and unambiguous, the court
must construe the document from its language
); see, e.g.,
Love v. Love, 114 Nev. 572, 959 P.2d 523 (1998) (concluding that a clear
and unambiguous document on its face must be construed according to its
plain language
); see, e.g., Ellison v. California State Automobile Association, 106 Nev. 601, 797 P.2d 975 (1990) (finding that Operating Agreements are construed from written language and enforced as written). Needless to say, the overwhelming authority
from the Nevada Supreme Court and elsewhere holds that unambiguous Operating
Agreements must be construed according to their plain language.

D. The Operating Agreement Clearly and Unambiguously Requires Arbitration.

The arbitration clause is clearly and unambiguously written. In particular, the
provision governing disputes of the Operating Agreement is wholly free of
ambiguity and clearly states that any dispute must be settled by
Arbitration
. Exhibit 1. Moreover, the Operating Agreement specifically
provides that the Arbitration should take place according to the rules of AAA. Id.
The Arbitration clause was fully negotiated and executed. Thus,
given the clear and unambiguous language of the Operating Agreement requiring
arbitration and Nevada’s presumption in favor of arbitration, the Operating
Agreement should be specifically enforced, requiring that this dispute be
submitted to binding arbitration and that this litigation is stayed in the
interim.

In the instant case, no discovery has taken place and there has not been significant
activity towards litigating either party's claims or defenses. No Answer has yet
been filed. No discovery has taken place. Therefore, no parties will suffer
prejudice from the change of forum from this honorable Court to arbitration. As
there is no prejudice, this Court should compel arbitration.

E. The Court is Not to Consider the Merits.

The United States Supreme Court prohibits consideration of the merits on a motion
to compel. The Supreme Court held that “there is a presumption of arbitrability
in the sense that ‘[a]n order to arbitrate the particular grievance should not
be denied unless it may be said with positive assurance that the arbitration
clause is not susceptible of an interpretation that covers the asserted
dispute.’” AT & T Tech., Inc. v. Communications Workers of Am., 475
U.S. 643, 650, 106 S.Ct. 1415, 1419, 89 L.Ed.2d 648 (1986) (quoting Steelworkers
v. Warrior & Gulf Navigation Co
., 363 U.S. 574, 582-83, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960)). In ruling on the arbitrability of a dispute, a court should not decide the merits of the underlying claims. See AT & T Tech., 475 U.S. at 649.

F. The Scope of the Broad Arbitration Clause.

Generally speaking, arbitration clauses are referred to as being “broad” or “narrow.”
Typically, broad arbitration clauses encompass all of the parties' disputes
arising out of their agreement, whereas narrow clauses are intended to limit
the disputes that are only specifically referred to arbitration. For instance,
in Parfi Holding AB v. Mirror Image Internet, Inc., 817 A.2d 149 (Del.
2002), the parties agreed to arbitrate any dispute “arising out of or in
connection with” their agreement, and like the case at bar. The Delaware
Supreme Court held that the parties had “signaled an intent to arbitrate all
possible claims that touch on the rights set forth in their contract.” Language
such as “all disputes arising out of the operating agreement are subject to
arbitration” or “any dispute or controversy arising under this operating
agreement shall be submitted to binding arbitration” is equally effective in evincing
the parties’ intent to submit all of their disputes to arbitration. See,
e.g., Drafting Arbitration Provisions for LLC Agreements, D. GaHuso, ABA
Business Law Today, Vol. 18, April 2009.

In the case at bar, LLC filed its Nevada Articles of Organization with the Secretary
of State on ___. Thereafter, in late November and early December, the various
members executed identical counterpart signature pages (attached to the
Operating Agreement, which is attached hereto as Exhibit “A”), which
provides as follows:

By signing this Agreement each member: (a) ratifies and confirms that the Company
was governed by and operated under the Operating Agreement as amended from time
to time by the Members; (b) from and after the date hereof agrees to adopt and
approve this Agreement as the Operating Agreement of LLC; and (c) confirms and
ratifies that his, or its membership interest is solely as set forth on Exhibit
A hereto, and that any certificate representing any membership interest issued
or outstanding prior to the effective date is null and void.”

NRS 86.286 provides as follows with respect to a situation as presented here where
the operating agreement is signed by the members after the articles of
organization are filed:

2. … If an operating agreement is adopted:

(a) Before the filing of the articles of organization or before the effective date
of formation specified in the articles of organization, the operating agreement
is not effective until the effective date of formation of the limited-liability
company.

(b) After the filing of the articles of organization or after the effective date of
formation specified in the articles of organization, the operating agreement
binds the limited-liability company and may be enforced whether or not the
limited-liability company assents to the operating agreement
. (Emphasis
added.)

Hence as a matter of law it is abundantly clear that in Nevada both the LLC itself,
as well as the members and managers, are all bound by the Operating Agreement
signed by the parties shortly after the articles of organization were filed
with the Secretary of State. Hence the Arbitrator Clause is binding on every
entity and individual named in the caption of the Complaint.

III. THE FEDERAL ARBITRATION ACT (“FAA”)

The Federal Arbitration Act (the “FAA” or the “Act”) provides that written
arbitration agreements are “valid, irrevocable and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any contract.” 9
U.S.C. § 2 (1999). The main purpose of the Arbitration Act is “to overcome
courts’ refusals to enforce agreements to arbitrate.” Allied-Bruce, 513
U.S. at 270. In passing the FAA, Congress was “motivated first and foremost by
a desire to change this [trend],... to enforce [arbitration] agreements into
which parties had entered, and to place such agreements ‘upon the same footing
as other contracts.’” Id. At 270-71 (citations omitted) (second
alteration in original).

To fulfill the purpose of enforcing arbitration clauses more uniformly throughout
the country, Congress established a broad principal of enforceability within
the provisions of the FAA. Doctor’s Assoc. V. Casarotto, 517 U.S. 681,
685 (quoting Southland Corp. v. Keating, 465 U.S. 1, 11 (1984)). The
Supreme Court has determined that “Congress would not have wanted state and
federal courts to reach different outcomes about the validity of arbitration in
similar cases.” Allied-Bruce, 513 U.S. at 72, citing Southland
Corp
., 465 U.S. at 15-16. Accordingly, the “the Court also concluded
that the Federal Arbitration Act preempts state law; and it held that state
courts cannot apply state statutes that invalidate arbitration agreements.” Id.
Hence, the outcome should be the same in state and federal court, applying
state or federal statutes.

III. CONCLUSION

Plaintiffs respectfully requests that this Court compel the arbitration of the dispute
between Plaintiffs and Defendants. The parties entered into a valid, clear and
unambiguous arbitration agreement requiring arbitration of claims concerning
the action or inaction of any party to the LLC. A dispute has now arisen
concerning Defendants’ actions as a member and manager of the LLC. As such, the
arbitration provision in the agreement between the parties should be given its
full force and effect and this case should proceed through final and binding
arbitration before the American Arbitration Association. Adequate time should
be provided to Defendants to file an appropriate Answer and Counterclaim
against Plaintiffs for intentionally interfering in the multi-million dollar transaction
currently pending.

This lawsuit should be stayed pending binding arbitration. Nevada law (as
articulated by both the Nevada Legislature and the Nevada Supreme Court), as
well as the Federal Arbitration Act, uniformly hold that the arbitrability of
disputes agreed upon in a written Contract or Agreement must be enforced.
Moreover, Nevada law consistently enforces the clear and unambiguous language
of contracts, particularly broad arbitration provisions such as that presented
here. In this case, the clear and unambiguous contractual provision requires
arbitration of “any disputes” arising out of or related to the Operating
Agreement. Pursuant to both the Nevada Arbitration Act and the Federal
Arbitration Act, this dispute should immediately be submitted to binding
arbitration and this litigation stayed in the interim.

DATED
this _____day of __________, ______.

ALBRIGHT,
STODDARD, WARNICK & ALBRIGHT

___________________________________________

G. MARK
ALBRIGHT, ESQ.

Nevada
Bar No. 001384

WILLIAM
H. STODDARD, JR., ESQ.

Nevada
Bar No. 008679

801
South Rancho Drive, Suite D-4

Las
Vegas, NV 89106

Attorneys
for Defendants

Wrongful Death Complaint; Motorcycle Accident; Vicarious Liability

 

COMPLAINT

G. MARK ALBRIGHT, ESQ           .

Nevada Bar No. 00394

WHITNEY B. WARNICK,
ESQ.

Nevada Bar No.
001573

ALBRIGHT, STODDARD,
WARNICK & ALBRIGHT

801 South Rancho
Drive, Suite D-4

Las Vegas,
Nevada  89106

(702) 384-7111

fax: (702) 384-0605

wbw@albrightstoddard.com

Attorneys for
Plaintiff

 

 

DISTRICT COURT

 

CLARK COUNTY, NEVADA

 

 

BECKY WOODRUFF, individually,                                                            )           Case
No.         A-14-708243-C

and BECKY WOODRUFF, as                                                                      )           Dept No.         XVIII

Administratrix of the Estate of                                   )

ROBERT MICHAEL BUCHANAN,                       )

Deceased,                                                        )

                                                                        )

                                                                                                                        Plaintiffs,        )            COMPLAINT
FOR WRONGFUL

                                                                                                                                                )           DEATH

                                                                        )

v.                                                                                                                                             )           (Arbitration Exemption Claimed)

                                                                                                                                                )           (Probable Jury Verdict in Excess

ROY COZART, an individual;                                                                      )           of $50,000)    

TRI STATE LOGISTICS, LLC, a                             )

Nevada limited liability company; and           )

DOES I through X, inclusive; and ROE        )

BUSINESS ENTITIES I through X,             )

inclusive,                                                                                                         )

                                                                        )

                                                Defendants..   )

                                                            
__  
    )

 

            COMES NOW, Plaintiffs BECKY WOODRUFF, an individual, and as
Administratrix of the Estate of ROBERT MICHAEL BUCHANAN, by and through her
undersigned counsel, and for their causes of action against the Defendants, and
each of them, Plaintiffs allege as follows:

GENERAL ALLEGATIONS

            1.         Plaintiff,
Becky Woodruff, is and at all times mentioned herein was a resident of the
County of Clark, State of Nevada.

            2.         Plaintiff,
Becky Woodruff, as Administratrix of the Estate of Robert Michael Buchanan,
deceased (“Buchanan”), appointed on September 26, 2014 in Case No.
P-14-082204-E as evidenced by the Order attached hereto as Exhibit “A,” is and
was, at all times relevant to these proceedings, a resident of the County of
Clark, State of Nevada.

            3.         At
all times relevant hereto, Defendant Roy Cozart (hereinafter”Cozart) is and was
a resident of the County of Clark, State of Nevada.

            4.         Defendant,
Tristate Logistics LLC (hereinafter “Tristate”) was and is a domestic limited
liability company duly organized and existing under the laws of the State of
Nevada, and at all relevant times hereto, was located at 71 North Pecos Road,
Las Vegas, Nevada 89101.   

            5.         The
true names and capacities, whether individual, corporate, associate, or
otherwise of DOES I through X, inclusive, and/or ROE BUSINESS ENTITIES I
through X, inclusive, are unknown to Plaintiffs, who therefore sue said
Defendants by such fictitious names. 
Plaintiffs are informed and believe and thereon allege that the
Defendants designated as DOE and/or ROE BUSINESS ENTITIES are any one of the
following:

                        a.         A party responsible in some manner for
the events and happenings herein referred to, and which party in some manner
caused the injuries and damages proximately thereby to the Plaintiffs as herein
alleged;

                        b.         Parties that were the agents, servants,
employees and contractors of the Defendants, and each of them, acting within
the course and scope of their agency, employment, or contract;

                        c.         Parties that owned, leased, managed,
operated, secured, inspected, repaired, maintained, entrusted and/or were
responsible for Defendants’ vehicles at the time of this incident;

                        d.         Parties that were responsible for the
supervision of one or more of the Defendants herein; and

                        e.         Parties that have assumed or retained
the liabilities of any of the Defendants’ vehicles by virtue of an agreement,
sale, transfer or otherwise.

            Plaintiffs specifically complain and
allege one or more causes of action against these parties, However, as of the
filing of this Complaint, Plaintiffs are not sure as to whether those entities
are individuals, partnerships, limited partnerships, corporations, associations
of individuals and businesses, or some other form of business ownership.  When the same has been ascertained by the
Plaintiffs, together with the appropriate charging allegations, Plaintiff will
ask leave of this Court to amend this Complaint to insert the true names and
capacities of said Defendants, DOES I through X and/or ROE BUSINESS ENTITIES I
through X, inclusive, and to join such in this action.

            6.         Upon
information and belief, at all times mentioned in this Complaint, Defendants,
and each of them, were the agents, servants, partners, employers, and employees
of each and every other Defendant, and were acting within the course and scope
of their agency, partnership and employment.

            7.         At
all times material to this Complaint, the acts and omissions giving rise to
this action occurred in Clark County, Nevada.

            8.         On
or about July 29, 2014, Buchanan was riding his Honda motorcycle and traveling
westbound on Spring Mountain Road between Decatur Boulevard and Lindell Road,
in Clark County, Nevada.

            9.         At
about the same time, Cozart, in the scope and course of his employment with
Tristate, driving an F150 Ford pickup truck belonging to his sister, pulled out
of a parking lot located at 5320 Spring Mountain Road, onto Spring Mountain
Road in front of a moving CAT bus, and failed to look left

for approaching
traffic in the second lane, thus colliding with Buchanan on his motorcycle, who
was traveling westbound on Spring Mountain Road in the second lane adjacent to
the CAT bus.

            10.       As
a result of Cozart’s extreme negligence and failure to yield the right-of-way,
Buchanan sustained serious bodily injury, eventually resulting in his untimely
death.

            11.       As
a result of Cozart’s negligence, Plaintiff Woodruff lost her son.

            12.       As
a result of Cozart’s negligence, Buchanan suffered extreme pain and suffering,
damages, injuries and medical expenses.

            13.       As
a result of Cozart’s negligence, the Estate of Robert Michael Buchanan (who
suffered extreme pain, suffering and other personal injuries resulting in his
eventual death) has sustained damages and claims of creditors.

/ / /

/ / /

FIRST CAUSE OF ACTION

(Wrongful Death; Negligence - Against All Defendants)

            14.       Plaintiffs
hereby repeat and reallege each and every fact set forth in the preceding
paragraphs, as though set forth in full at this time,

            15.       It
was the duty of Cozart to drive in a safe manner, and not to negligently,
carelessly and/or recklessly cause injury or damage to other persons, including
the Plaintiffs and Buchanan.

            16.       Cozart
drove negligently and recklessly due to the following:

                        a.         Cozart failed to keep his vehicle under
proper control at all times;

                        b.         Cozart was inattentive and failed to
keep a proper lookout for other vehicles lawfully using the roadways;

                        c.         Cozart failed to stop his vehicle in
sufficient time to avoid colliding with Buchanan causing his death;

                        d.         Cozart failed to afford Buchanan proper
and sufficient notice and warning of the approach of Cozart’s vehicle
encroaching into Buchanan’s travel lane, sufficient for Buchanan to stop or
otherwise to properly protect himself, or avoid the collision;

                        e.         Cozart failed to use due care and to
yield the right of way to oncoming traffic while exiting a small parking lot,
which had the right of way on Spring Mountain Road, including Buchanan;

                        f.          Cozart made an intentional but
dangerous decision to cut in front of the moving CAT bus without being able to
see if vehicles were traveling next to the bus; and

                        g.         Cozart made the erroneous and dangerous
assumption that no other vehicles were traveling in the number 2 travel lane
next to the bus, which was the major cause of Buchanan’s death.

            17.       As
a direct and proximate result of the aforesaid negligence, carelessness and
recklessness of the Defendants, and each of them, Plaintiff Woodruff has
suffered the wrongful death of her son, Robert Michael Buchanan, and has
thereby suffered, and continues to suffer, grief, loss of guidance, sorrow, severe
emotional distress, mental pain, loss of companionship, society, and comfort
and also damages for pain and suffering and disfigurement of her son as
contemplated by law in NRS 41.085, all of which caused Plaintiff’s damages in
excess of $10,000.

            18.       As
a direct result of the negligence of the Defendants, and each of them,
Plaintiff Woodruff suffered personal injuries, including, but not limited to,
severe emotional distress, mental pain, loss of companionship, society, pain
and suffering medical bills past and future in excess of $10,000.

            19.       Plaintiffs
have been forced to retain the services of ALBRIGHT, STODDARD, WARNICK &
ALBRIGHT to prosecute this action, and Plaintiffs are entitled to recover the
reasonable attorneys’ fees and costs of those services.

SECOND CAUSE OF ACTION

(TRISTATE LOGISTICS LLC (Respondeat Superior);

Negligence and Wrongful Death)

            20.       Plaintiffs
incorporate by reference herein the foregoing paragraphs as though fully set
forth herein.

            21.       Plaintiffs
are informed and believe that at the time of the subject accident, Tristate was
the employer and/or had control of its agent Buchanan. 

            22.       Cozart
was acting within the course and scope of his duties for Tristate delivering
auto parts and other packages for and on behalf of Tristate at the time of the
collision with Buchanan.

            23.       Under
the doctrine of Resondeat Superior, Defendant Tristate is vicariously liable,
jointly and severally, for the damages suffered by Buchanan and Plaintiff as a
direct and proximate result of its employees and/or agents’ negligence while
driving in the course and scope of his employment as a delivery driver and/or
courier employee of Tristate.

            24.      
Tristate, through its employees and/or agents, owed a duty to Buchanan and
Plaintiff to drive safely and to avoid dangerous and/or reckless conduct.

            25.       Tristate,
by and through its employees and/or agents, breached its duties of due care by
negligently, carelessly and recklessly failing to drive in a safe manner which
caused Buchanan’s death and damages to Plaintiffs.

            26.       As
the direct and proximate consequences of Tristate’s negligent, careless and
reckless breach of duty, Plaintiff Woodruff suffered the loss and wrongful
death of her son, Buchanan, all of which caused Plaintiff damages in excess of
$10,000.

            27.       As
the direct and proximate consequences of Tristate’s negligent, careless and
reckless breach of duty, Plaintiff Woodruff has suffered, and continues to
suffer, emotional damage, and pain and suffering to her general damage in
excess of $10,000.

            28.       Plaintiffs
have been forced to retain the services of ALBRIGHT, STODDARD, WARNICK &
ALBRIGHT to prosecute this action, and Plaintiffs are entitled to recover the
reasonable attorneys’ fees and costs of those services.

            WHEREFORE, Plaintiff Becky
Woodruff, expressly reserving her right to amend this Complaint to set forth
causes of action and/or items of damages not yet known, prays for judgment for
each of these causes of action as follows:

            1.         For
compensatory damages for medical expense in the amount in an amount in excess
of $10,000;

            2.         For
general damages for past, present and future pain and suffering, distress, loss
of life activities, and other damages in an amount in excess of $10,000;

            3.         For
past, present and future special and general damages, as set forth above,
including, but not limited to, bodily injury, medical expenses, loss of life,
other out-of-pocket expenses and consequential damages, physical pain and
suffering, loss of enjoyment of life in an amount in excess of $10,000; and

                        4.         For pre-judgment and post-judgment
interest, reasonable attorneys’ fees, costs of court, and such other and future
relief that the court may deem just and proper.

 

            DATED this _____ day of October, 2014.

 

ALBRIGHT,
STODDARD, WARNICK

&
ALBRIGHT

 

 

By:______________________________

G. MARK ALBRIGHT, ESQ.

Nevada Bar No. 01394

WHITNEY B. WARNICK, ESQ.

Nevada Bar No. 001573

801 South Rancho Drive, Suite D-4

Las Vegas, Nevada  89106

(702) 384-7111

Attorneys for Plaintiffs

Opposition to Las Vegas Sand's Motion to Dismiss Amended Complaint

 

Mark Albright

Nevada
Bar No. 1394

William
H. Stoddard, Jr.

Nevada
Bar No. 8679

Albright,
Stoddard, Warnick and Albright

801 S. Rancho Dr. D4, Las Vegas, NV 89106

Phone:
(702) 384-7111

Fax:
(702) 384-0605

Email:
gma@albrightstoddard.com

Email:
bstoddard@albrightstoddard.com

Attorneys for Plaintiff

(Additional Counsel on Signature Page)

 

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEVADA

 

W.A. SOKOLOWSKI,
                                   :

Individually
  and on Behalf of                         :

LAS VEGAS SANDS CORP.,                    :

Plaintiff,                      :

                                                                         :

            v.                                                        
  :

SHELDON G. ADELSON, et al.                 :

 Defendants                :

 :

 :

                                                                         :

            and                                                     
  :

                                                             :

LAS VEGAS SANDS CORP.,                    :

                               Nominal
  Defendant.        :

 

 

CASE NO. 2:14-cv-00111-JCM-NJK

 

 

 

PLAINTIFF’S MEMORANDUM OF POINTS AND
  AUTHORITIES IN OPPOSITION TO LAS VEGAS SANDS CORP.’S MOTION TO DISMISS
  AMENDED COMPLAINT

 

 

           



TABLE OF CONTENTS

TABLE
OF AUTHORITIES.............................................................................................. ii

I.   PERTINENT
FACTS AND PROCEDURAL HISTORY........................................... 1

II.   ARGUMENT............................................................................................................... 4

A.   Plaintiff Does Not Lack Standing To Assert
His Claims................................. 4

1.   Plaintiff Has Standing To Pursue All Post-Purchase Conduct.................... 4

 

2.   Plaintiff’s Claims Against Defendant Hipwell
Are Valid........................... 8

 

3.   Plaintiff Has No Conflicts Of Interest........................................................ 8

 

B.   The FCPA Allegations Should
Not Be Dismissed Due To Pending

Litigations............................................................................................................

 

1.   The Colorado River Doctrine Does Not Apply To This Case................... 11

 

2.   There Is No Basis For Granting
Dismissal................................................. 14

 

C.   The Board’s Rejection Of Plaintiff’s

Pre-Suit Demands Was

Wrongful And Is Not Protected By The Business Judgment Rule................. 15

 

1.   The Business Judgment Rule
Does Not Apply......................................... 16

 

2.   The Board’s Rejection Of
Plaintiff’s FCPA Allegations

Was Wrongful............................................................................................ 17

 

D.   The Complaint States Valid Claims
For Violation Of Section 14(a)............. 21

 

III.   CONCLUSION........................................................................................................ 22



TABLE OF AUTHORITIES

Cases

 

Allison v. General Motors Corp.,

  604
F. Supp. 1106 (D. Del. 1985)............................................................................... 7,
16

 

Ambrosia Coal &
Constr. Co. v. Morales,

  368
F.3d 1320 (11th Cir. 2004)....................................................................................... 11

 

Aronson v. Lewis,

  473 A.2d 805 (Del. 1984)................................................................................................ 15

 

Attwood v. Mendocino
Coast Dist. Hosp.
,

  886
F.2d 241 (9th Cir. 1989)........................................................................................... 14

 

Auerbach v. Bennett,

  393 N.E.2d 994 (N.Y. 1979)........................................................................................... 19

 

Bagdan v. Beck,

  140 F.R.D. 650 (D.N.J. 1991)......................................................................................... 10

 

Berkman v. Rust Craft Greeting Cards, Inc.,

  454 F. Supp. 787 (S.D.N.Y. 1978).................................................................................. 22

 

Bertozzi v. King Louie Int’l, Inc.,

  420 F.Supp. 1166 (D.R.I. 1976)...................................................................................... 10

 

Brehm v. Eisner,

  746 A.2d 244 (Del. 2000)................................................................................................ 15

 

Brown v. One Beacon Ins. Co.,

  317 F. App’x. 915 (11th Cir. 2009)................................................................................. 16

 

City of Orlando Police Pension Fund v. Page,

  970 F. Supp. 2d 1022 (N.D. Cal. 2013)...................................................................... 6,
19

 

Clark v. Lacy,

  376
F.3d 682 (7th Cir. 2004)........................................................................................... 11

 

Colorado River Water
Conservation Dist. v. United States
,

  424
U.S. 800 (1976)................................................................................................. passim

 

Compare Bilunka v. Sanders,

  1994 WL 447156 (N.D.Cal. Mar.1, 1994)........................................................................ 4

 

Coopers & Lybrand v.
Sun-Diamond Growers of CA
,

  912
F.2d 1135 (9th Cir. 1990)......................................................................................... 14

Court Appointed Receiver of Lancer Offshore, Inc. v. Citco Group Ltd.,

  2008 U.S. Dist. LEXIS 25740 (S.D. Fla. Mar.
31, 2008)............................................... 16

 

Desaigoudar v. Meyercord,

  223 F.3d 1020 (9th Cir. 2000)......................................................................................... 21

 

Dura Pharmaceuticals, Inc. v. Broudo,

  544 U.S. 336 (2005)........................................................................................................ 21

 

FDIC v. Baldini,

  2013 U.S. Dist. LEXIS 162033 (S.D. W. Va. Nov.
14, 2013)....................................... 16

 

Fed. Sav. & Loan Ins. Corp. v. Musacchio,

  695 F. Supp. 105 (N.D. Cal. 1988).................................................................................. 16

 

Federated Rural Elec.
Ins. Corp. v. Arkansas Elec. Coops.
,

  48 F.3d
294 (8th Cir. 1995)............................................................................................. 12

 

Fru-Con Constr. Corp. v.
Controlled Air, Inc
.,

  574
F.3d 527 (8th Cir. 2009)........................................................................................... 13

 

Gagliardi v. Trifoods Int’l, Inc.,

  683 A.2d 1049 (Del. Ch. 1996)....................................................................................... 17

 

Gaines v. Houghton,

  645 F.2d 761 (9th Cir. 1981)........................................................................................... 22

 

Gamoran v. Neuberger Berman LLC,

  536 Fed. Appx. 155 (2d Cir. 2013)................................................................................. 19

 

Goldfein v. Brown,

  2010
U.S. Dist. LEXIS 132251 (N.D. Ill. Dec. 10, 2010).............................................. 15

 

Great Am. Ins. Co. v.
Gross,

  468
F.3d 199 (4th Cir. 2006)........................................................................................... 11

 

Greenfield v. Hamilton Oil Corp.,

  760 P.2d 664 (Co. Ct. App. 1988).................................................................................. 19

 

Gulfstream Aerospace
Corp. v. Mayacamas Corp.,

  485
U.S. 271 (1988)........................................................................................................ 13

 

Halebian v. Berv,

  644 F.3d 122 (2d Cir. 2011)............................................................................................ 16

 

Hanover Ins. Co. v.
Plaquemines Parish Gov’t
,

  2013
U.S. Dist. LEXIS 54935 (E.D. La. April 17, 2013)............................................... 13

 

Hasan v. CleveTrust Realty
Investors

  729 F.2d 372 (6th Cir. 1984)........................................................................................... 19

 

Holder v. Holder,

  305
F.3d 854 (9th Cir. 2002)........................................................................................... 11

 

Hussein v. Fushi
Copperweld, Inc.,

  2011 U.S. Dist. LEXIS 38773 (D. Nev. Apr. 7,
2011)................................................... 15

 

In re Bank of America Corp. Securities, Derivative & ERISA Litig.,

  757 F.Supp.2d 260 (S.D.N.Y. 2010)................................................................................. 9

 

In re E.F. Hutton Banking
Practices Litig.
,

  634 F.
Supp. 265 (S.D.N.Y. 1986).................................................................................. 14

 

In re Extreme Networks, Inc. S’holder Derivative Litig.,

  2009 WL 3872141 (N.D. Cal. Nov. 17, 2009).................................................................. 5

 

In re Google, Inc. S’holder Derivative Litig.,

  2012 WL 1611064 (N.D.Cal. May 08, 2012).................................................................... 4

 

In re MRV Commc’ns, Inc.,

  2010 WL 1891717 (C.D. Cal. May 10, 2010)................................................................... 5

 

In re Ormat Techs., Inc.,

  2011 WL
3841089 (D. Nev. Aug. 29, 2011)................................................................... 14

 

In re RasterOps Corp. Sec. Litig.,

  1993 WL 476651 (N.D. Cal. Sept. 10, 1993).................................................................... 5

 

In re Tower Air, Inc.

  416 F.3d 229.................................................................................................................... 16

 

In re TransOcean Tender Offer Sec. Litig.,

  455 F.Supp. 999 (N.D. Ill. 1978)....................................................................................... 9

 

In re Zoran Corp. Der. Litig.,

  511 F. Supp.2d 986 (N.D. Cal. 2007)......................................................................... 5,
22

 

Intel Corp. v. Advanced
Micro Devices
,

  12 F.3d
908 (9th Cir. 1993)............................................................................................. 13

 

J.I. Case. Co. v. Borak,

  377 U.S. 426 (1964).......................................................................................................... 8

 

Kamen v. Kemper Fin. Servs.,

  500 U.S. 90 (1991).......................................................................................................... 15

 

Kamerman v. Pakco Companies, Inc.,

  1978 U.S. Dist. LEXIS 19700 (S.D.N.Y. Feb. 6,
1978)................................................. 10

 

Kaplan v. Wyatt,

  484 A.2d 501 (Del. Ch. 1984)......................................................................................... 19

 

Knopf v. Semel,

  2010 U.S. Dist. LEXIS 35925 (N.D. Cal. Mar.
17, 2010).............................................. 13

 

Krasner v. Moffett,

  826 A.2dd 277 (Del. 2003)............................................................................................. 17

 

Lambrecht v. O’Neal (In
re Merrill Lynch & Co.)
,

  773 F. Supp.2d 330 (S.D.N.Y. 2011).............................................................................. 14

 

Landis v. North American
Co
.,

  299
U.S. 248 (1936)........................................................................................................ 10

 

Levine v. Smith,

  591 A.2d 194 (Del. 1991)...................................................................................... 7,
13, 16

 

Millennium Square Residential Ass’n v. 2200 M St. LLC,

  2013 U.S. Dist. LEXIS 96327 (D.D.C. July 10,
2013)................................................... 17

 

Nakash v. Marciano,

  882
F.2d 1411 (9th Cir. 1989)......................................................................................... 11

 

New York City Employees’ Retirement System v. Jobs,

  593 F.3d 1018 (9th Cir. 2010)......................................................................................... 21

 

Parnes v. Bally Entm’t Corp.,

  722 A.2d 1243 (Del. 1999).............................................................................................. 17

 

Pistoll v. Lynch,

  96 F.R.D. 22 (D. Hawaii 1982)......................................................................................... 9

 

Romine v. CompuServe
Corp.,

  160 F.3d 337 (6th Cir. 1998)........................................................................................... 13

 

Ryskamp v. Looney,

  2011 U.S. Dist. LEXIS 98644 (D. Colo. Sept. 1,
2011)................................................. 19

 

Security Farms v. Int’l
Broth. of Teamsters, Chauffers, Warehousemen & Helpers,

  124 F.3d 999 (9th Cir. 1997)........................................................................................... 11

 

Shamrock Holdings v. Arenson,

  456 F. Supp. 2d 599 (D. Del. 2006)................................................................................ 16

 

Sprando ex rel. Intern. Game Tech. v. Hart,

  2011 WL 3055242 (D.Nev. July 22, 2011)....................................................................... 4

 

United States v. City of
Las Cruces,

  289
F.3d 1170 (10th Cir. 2002)....................................................................................... 11

 

Yamamoto v. Omiya,

  564 F.2d 1319 (9th Cir. 1977)........................................................................................... 8

 

Zapata Corp. v. Maldonado,

  430 A.2d 779 (Del. Supr. 1981)...................................................................................... 19

 

Rules
and Statutes

 

Fed. R. Civ. P. 12(b)(6)..................................................................................................... 16

 

Fed. R. Civ. P.12(d).......................................................................................................... 16

 

Section 14(a) of the Securities Exchange Act, 15 U.S.C. §78m(a) .................... 8, 9, 10, 21

 

 

 



Plaintiff W. A.
Sokolowski (“Plaintiff”), by and through his undersigned counsel, respectfully submits
this memorandum of points and authorities in opposition to the motion to
dismiss Amended Complaint filed by Nominal Defendant Las Vegas Sands Corp. (“Sands”
or the “Company”).  For the reasons
stated below, Sands’ motion to dismiss should be denied in its entirety.

  1. I.                 
    PERTINENT FACTS AND PROCEDURAL HISTORY

This shareholder’s action is brought by Plaintiff
derivatively on behalf of Sands, asserting claims of, inter alia, serious wrongdoing on the part of the members of Sands’
Board of Directors (the “Board”) in connection with bribery, money laundering
and other illegal activities which conduct has violated, among other laws, the
Foreign Corrupt Practices Act (“FCPA”), the Bank Secrecy Act, the Securities
Exchange Act, and applicable state and other laws.  Such conduct, including its cover-up and the “stonewalling”
of criminal and other investigations has gone on for years, continuing through
the present, with the knowledge or acquiescence of the Board, its Audit
Committee, and the Company’s former auditor, Pricewaterhouse Coopers, LLP (“PWC”),
subjecting Sands and its shareholders to presently incalculable damages.[1] 

Sands and its subsidiaries have been the subject of
long-running criminal and civil investigations by the U.S. Department of
Justice (“DOJ”), the Securities and Exchange Commission (“SEC”) and various
regulatory bodies in the United States and China.  Any finding of violations of the FCPA could
have a material adverse effect on the Company’s financial condition.  Such violations of law also jeopardize Sands’
gaming licenses pursuant to rules of the Nevada Gaming Control Board (“NGCB”)
and elsewhere. 

On June 10, 2011, the
Board authorized its Audit Committee, composed of three Board directors, Defendants
Irwin Siegel, Jason Ader, and Jeffrey Schwartz, to respond to an SEC subpoena
and DOJ inquiry concerning the Company’s operations in Macau.  Am. Complt. ¶ 151.  On July 26, 2011, the Board designated the
Audit Committee as a “special litigation committee” (“SLC”) and expanded its
powers to include investigating the allegations raised in Moradi v. Adelson
et al.,
Case Nos. 2:11-cv-490.  Am. Complt.
¶¶ 146, 151.  Moradi, a
shareholder action then pending in this Court, is related to a pending state
court action entitled Kleinschmidt v. Adelson, et al., Case No.
A-12-658749B.  Unlike Plaintiff, none of
the plaintiffs in such cases made pre-suit demands on Sands’ Board as required
under applicable legal principles.

In August 2012, the
Audit Committee prepared a report for NGCB which acknowledged that the Company’s
“controls and books and records were not sufficient.”  Am. Complt. ¶ 73.  On March 1, 2013, the Company disclosed that
it informed the SEC in its December 31, 2012 filing that an internal review
found the Company “likely violated” the books and records and internal control
provisions of the FCPA.  Am. Complt. ¶¶
74, 147.  Despite substantial evidence of
serious violations of federal law by Defendant Adelson and other Board members,
steps were not taken to remedy the wrongdoing. 
Am. Complt. ¶ 155.  In an April,
2013 SEC filing, Sands reported that PWC resigned as the Company’s auditor after
working for Defendant Adelson for 25 years. 
Am. Complt. ¶ 79.

Plaintiff made a pre-suit demand on the Board as required
by Federal Rule 23.1, on January 22, 2013. (“Demand Letter”)  Am. Complt. ¶ 142.  Richard Sauber, Esq., counsel for all defendants
in Moradi, responded in the guise of acting for the Company, that the
Demand Letter was referred, on behalf of the Board, to the Audit Committee, despite
the fact that the wrongdoing described in the Demand Letter involved
fundamental failures of the Audit Committee itself, including its toleration
and lack of adequate controls over payment of bribes in China and serious money
laundering at the Sands’ casinos.  Am. Complt.
¶¶ 149, 150. 

The Board has been disingenuous as to its actual response
to Plaintiff’s pre-suit Demand Letter. 
In fact, most of Plaintiff’s claims therein have been completely
ignored.  Only Plaintiff’s FCPA
allegations have been explored in the context of the already pending Audit
Committee investigation.  Am. Complt. ¶
153.   The details about this
investigation into Sands’ practices and violations of the FCPA have been
closely guarded and not disclosed to shareholders.  Am. Complt. ¶ 161.  Plaintiff’s counsel repeatedly sought to
learn from Daniel Bookin, Esquire, counsel to the Audit Committee, and Mr. Sauber
material facts relating to the purported investigation of Plaintiff’s demands
by the SLC, and he was repeatedly “stonewalled.”  Am. Complt. ¶ 163.  After the passage of one year with no
response from the Board or the Audit Committee, Plaintiff deemed his demands
constructively rejected and commenced this action on January 23, 2014.  Am. Complt. ¶ 164.  Sands’ motion to dismiss this litigation
provides further evidence that Plaintiff’s demands have been de facto
rejected.  Id.

The Company spent years representing in court that the
Audit Committee investigation into the Company’s FCPA violations was
purportedly ongoing.  As of March 2014,
the Company announced that the investigation has been completed.  Nevertheless, notwithstanding its
materiality, no report by the SLC, the Audit Committee or the Board has been
made public or otherwise communicated to Sands’ shareholders.  Am. Complt. ¶¶ 76, 161.  It is believed that the timing of the
conclusion of the investigation and issuance of a final report has been delayed
at the request of Defendant Adelson or counsel representing his interests.  Am. Complt.
¶ 77.  

The Board acted in bad faith by refusing to investigate
most of Plaintiff’s claims, other than the underlying FCPA allegations which
already were part of the Audit Committee investigation.[2]
Am. Complt. ¶ 156.  Despite the years
spent investigating Plaintiff’s FCPA allegations, there is no indication that
the SLC ever made a determination or recommendation to the Board as to any of Plaintiff’s
demands.  The Board is now engaging in a
new stalling tactic, claiming to defer the investigation into Plaintiff’s FCPA
allegations until the stayed derivative actions and government investigations
have been resolved.   Plaintiff has
alleged that the SEC and DOJ investigations have not been resolved because
negotiations are being carried out by conflicted counsel representing
simultaneously Sands’ interests and those of Defendant Adelson and his
colleagues on the Board.  Am. Complt. ¶ 77. 

This action is the only pending derivative litigation that
exposes the Board’s bad faith handling of shareholder complaints about,
government investigations into the Company’s FCPA violations and other
wrongdoing.  Plaintiff sheds light on the
Board’s waste of corporate funds, designating the Audit Committee as a SLC and directing
its purported investigation solely to benefit the Individual Defendants who are
exposed to liability for operating Sands without adequate controls and in
violation of various laws.

II.        ARGUMENT

  1. A.               
    Plaintiff Does Not Lack Standing to Assert
    His Claims
    1. 1.        
      Plaintiff Has Standing to Pursue All Post-Purchase Conduct

Sands argues
incorrectly that Plaintiff’s stock purchase, which occurred after the initial
FCPA and money laundering violations of law, after the disclosure of the Jacobs lawsuit, government
investigations, and derivative litigations, and after the commencement of an
Audit Committee investigation not connected to Plaintiff’s claims, forecloses
him from bringing this lawsuit.   Besides
the fact that this contention has no basis as a matter of law, as discussed
below, Sands does not deny that the misleading proxy statements in 2013 and
2014, the false certifications in 2012, 2013, and 2014, and the failure of the
Board to respond to Plaintiff’s demands were wrongful conduct which occurred
after he became a Sands shareholder.. 

Indeed, Plaintiff
states this fact quite clearly with respect to the claims he is making.  The Amended Complaint specifically asserts
that Plaintiff’s claims are based “solely with respect to the wrongdoing of the
Individual Defendants and Defendant Hipwell which occurred subsequent to his becoming a shareholder of Sands.
Am. Complt. ¶138 [emphasis added].  The
language could not be clearer. 
Wrongdoing which occurred before Plaintiff’s stock purchase was provided
only for contextual purposes.  Id.  Sands’ attempt to invalidate these very
specific allegations by claiming Plaintiff is circumventing the standing
requirement, has no merit.

At the outset,
Plaintiff has made clear that he does not seek to invoke the continuing wrong
doctrine.  As this Court indicated in its
July 30, 2014 Order, such exception has not been adopted by the Ninth
Circuit.  While some district courts
within the Ninth Circuit have applied the exception as Plaintiff has urged it
should have done here, one district court of Nevada has rejected the exception.
Compare Bilunka v. Sanders, 1994 WL 447156, at *2 (N.D.Cal. Mar.1, 1994)
(applying continuing wrong exception where the parties agreed to Delaware law)
and In re Google, Inc. S’holder Derivative Litig., 2012 WL 1611064, at
*11 n. 4 (N.D.Cal. May 08, 2012) (considering exception, but found it to be “extremely
narrow” and inapplicable under the facts of the case) with Sprando ex rel.
Intern. Game Tech. v. Hart
, 2011 WL 3055242, at *3 (D.Nev. July 22, 2011) (“We
are unable to find support in this Circuit that the continuing wrong exception
is applicable.”).

Sands objects to Plaintiff’s
allegations based solely on Rule 23.1 and the proposition that a shareholder
must own stock at the time of the alleged wrongdoing to proceed derivatively on
behalf of the corporation – a proposition that Plaintiff is not disputing.  However, while the Court has concluded, based
upon the state of the law in the Ninth Circuit, that Plaintiff does not have
standing to bring an action for wrongful conduct that occurred before he became
a Sands shareholder, allegations of such pre-purchase wrongful conduct are
permissible. 

In re Zoran Corp.
Derivative Litig
., 511 F. Supp. 2d 986, 1009 (N.D. Cal. 2007), is
instructive. There, a shareholder brought a derivative action against the
corporation’s current and former officers and directors based on the backdating
of stock options that occurred over a nine-year period.  Although the court held that “plaintiff does
not have standing to seek recovery for the corporation for transactions that
occurred before [the day he acquired his stock], he may still refer to grants
before that date to establish that Zoran’s management had a predisposition to
engage in backdating.”  Id. at
1010 (emphasis added).  In so holding,
the court ruled that plaintiff had standing for “claims regarding events
occurring after he acquired stock.”  Id

Other courts in the
Ninth Circuit have come to the same conclusion. 
See, e.g., In re MRV Commc’ns, Inc., CV 08-3800 GAF(RCX), 2010 WL
1891717, at *2 (C.D. Cal. May 10, 2010) (in denying Defendants’ motion to
dismiss, the court held “[a]llegations of pre-standing conduct are permissible
to demonstrate defendants’ pattern of conduct to support claims based on
conduct occurring during the ownership period. [F]acts that occurred prior to
when they owned MRV stock to demonstrate a pattern of wrongful conduct . . .
are permitted for that limited purpose.”); In re Extreme Networks, Inc. S’holder
Derivative Litig
., C-07-02268 RMW, 2009 WL 3872141, at *5 (N.D. Cal. Nov.
17, 2009) (court refused to strike factual allegations of transactions and
conduct prior to plaintiff’s stock purchase and held that those allegations “are
relevant in spite of [plaintiff’s] lack of standing” because it illustrates a
pattern of wrongdoing.); In re RasterOps Corp. Sec. Litig., C 92-20115
RMW EAI, 1993 WL 476651, at *7 (N.D. Cal. Sept. 10, 1993) (“the allegations
based on misstatements and insider trading prior to plaintiffs’ purchase of
RasterOps stock may remain in the Complaint to provide ‘background’ against
which other acts of the defendants may be judged.”).

Furthermore, claims for
wrongful conduct that occurred during the period of Plaintiff’s stock ownership
will not be extinguished, even if such claims are similar and relate to conduct
that preceded Plaintiff’s acquisition.  In City of Orlando Police Pension Fund v.
Page
, 970 F. Supp. 2d 1022, 1024 (N.D. Cal. 2013), the court held
that the plaintiff was “permitted to challenge transactions which occurred
during its ownership period, even if those transactions are similar to other,
pre-ownership transactions.”  Id.
at 1028.  

In that case, the
plaintiff commenced a shareholder derivative action on behalf of nominal
defendant, Google, Inc. (“Google”), against Google’s Board of Directors,
alleging that defendants allowed certain Canadian pharmacies to advertise
through Google’s search engine for the sale of prescription medications to be
imported into the United States, and the advertisements were unlawful,
resulting in the entry of a non-prosecution agreement between Google and the
DOJ, and the payment by Google of a $500 million fine.  While Google was warned of the unlawful
conduct a number of times by various entities, Google did nothing to block
Canadian pharmacy advertisements until 2009, when it became aware of the DOJ
investigation.  Id. at 1025.  The Court held that “each and every time that
defendants consciously decided to ignore a warning and not to take any action
to block the illegal advertisements constitute[d] a separate transaction.”  Id. at 1028.  In other words, “ignored warnings before
[plaintiff’s stock purchase] did not immunize them from liability for any
ignored warnings that occurred after [plaintiff’s stock purchase]”.  Id. 
In so holding, “plaintiff [had] standing to assert a claim that
defendants breached their fiduciary duties by failing to respond to those
warnings [that occurred after plaintiff’s stock purchase].” Id.

Likewise, in the case
at bar, the fact that the Audit Committee began investigating the Company’s
deficient controls and poor record keeping prior to Plaintiff’s stock purchase,
does not extinguish his claims regarding the FCPA violations specifically concealed
from shareholders and the SEC in 2013 and 2014, the Board’s cover up of these
violations throughout the time that Plaintiff has been a shareholder, and the
refusal to provide the public and shareholders with the Audit Committee’s
report, which was completed in January 2013, after Plaintiff became a
shareholder.  Am. Complt. ¶¶ 73-77. 

Nor does the $47.3
million settlement with DOJ to avoid criminal prosecution with respect to
laundering of funds of just two of the individual for whom Sands’ management “assisted”,
Messrs. Siddiqui and Zhen Li, eliminate the rest of Plaintiff’s money
laundering claims, including Sands’ attempted development of EuroVegas in Spain,
and the failure to take appropriate steps to eradicate these practices.  Am. Complt. ¶¶ 88-91.

Finally, in a
transparent attempt to avoid Plaintiff’s valid allegations of the Audit
Committee’s “whitewash” investigation, Sands incorrectly, and without any valid
legal basis, claims that Plaintiff may not question the Board’s response to his
demands (or lack thereof) simply because the Audit Committee commenced an
investigation in 2011 (prior to Plaintiff’s stock purchase) in order to respond
to an SEC subpoena, DOJ inquiry and the claims alleged in the then-pending Moradi
case.  This expansion of the
business judgment rule has no legal basis.

To the contrary, the
Board was not permitted to “brush off” Plaintiff’s demands by responding that
the allegations are under investigation. 
Allison v. General Motors Corp., 604 F. Supp. 1106, 1117 (D. Del.
1985).  Once Plaintiff made his written
demand, the Board was required to investigate the wrongdoing alleged and decide
upon an appropriate course of action.  Levine
v. Smith
, 591 A.2d 194, 212 (Del. 1991).  The Amended Complaint specifically outlines the
way in which the Board conducted an investigation solely into the FCPA
allegations of Plaintiff’s demands, completely ignoring the other claims. Am.
Complt. ¶¶ 146, 149, 153, 156. 
Furthermore, despite the fact that the Audit Committee’s so-called
investigation has been completed for more than one year and a half, the Board
has not advised Plaintiff or his counsel of any decision relating to his
demands.  Am. Complt. ¶¶ 76, 161, 164. Where,
as here, the Board refuses to investigate the demands, and constructively
rejects them, the Board’s decision is not afforded the protection of the
business judgment rule.  Allison,
604 F. Supp. At 1117; Levine, 591 A.2d at 212.

Under these
circumstances, Plaintiff has standing to pursue this action, which is based solely
upon post-purchase wrongdoing by the Individual Defendants and Defendant
Hipwell.

  1. 2.        
    Plaintiff’s Claims Against Defendant Hipwell Are
    Valid

In attacking Plaintiff’s
claims against Defendant Hipwell, Sands asserts two basic arguments, neither of
which is persuasive.[3]  Sands’ contention that Plaintiff’s claims
fail the contemporaneous ownership test since the audits at issue occurred
prior to Plaintiff’s stock acquisition is flatly incorrect. 

The Amended Complaint
makes clear that the false “certification” of PWC’s reckless and otherwise
improper audit of the financial statements of Sands as of December 31, 2011 was
done at the end of February 2012, after Plaintiff became a shareholder of the
Company.  Furthermore, it is alleged that
PWC’s resignation in 2013 was due to its potential exposure from the re-trial
of the lawsuit of Richard Suen (due to occur after Plaintiff became a Sands
shareholder) of its violation of auditor independence rules, as well as from
evidence that came to light after Plaintiff’s stock acquisition, that PWC’s
audits (including those conducted after Plaintiff became a Sands shareholder),
were not carried out in conformity with  Generally Accepted Auditing Standards (“GAAS”).
 Am. Complt. ¶ 81. 

As discussed in detail
above, Plaintiff’s audit claims based on wrongdoing that occurred while
Plaintiff was a shareholder are not extinguished by the fact that they are
similar to claims arising out of the faulty audits conducted beforehand.  Accordingly, Plaintiff easily satisfies the
standing requirements.

  1. 3.        
    Plaintiff Has No Conflicts of Interest

Sands’ assertion that
Plaintiff cannot simultaneously assert a direct and derivative Section 14(a) of
the Securities Exchange Act, 15 U.S.C. §78m(a) (“Section 14(a)”), claim
contradicts longstanding Ninth Circuit law. 
In Yamamoto v. Omiya, 564 F.2d 1319 (9th Cir. 1977), the Ninth
Circuit expressly recognized the right of a shareholder to bring both direct
and derivative proxy claims.  See also
J.I. Case. Co. v. Borak,
377 U.S. 426, 431, 84 S.Ct. 1555, 12 L.Ed.2d 423
(1964) (explicitly recognizes the right of a shareholder to bring both direct
and derivative actions).  Notwithstanding
that the holding arose out of the class certification context, the Ninth
Circuit made clear that Plaintiff’s assertion of both a direct and derivative
Section 14(a) claim is proper as a matter of law. 

Subsequent cases are in
accord and have rejected the very argument raised by Sands here that
simultaneous direct and derivative claims create an irreconcilable conflict of
interest.  See, e.g., Pistoll v. Lynch,
96 F.R.D. 22, 29 fn. 12 (D. Hawaii 1982) (“In fact, the Yamamoto court held
that a Rule 23 class action may be certified even if a derivative suit will, at
the same time, provide similar and adequate relief”); In re TransOcean
Tender Offer Sec. Litig
., 455 F.Supp. 999, 1014 (N.D. Ill. 1978) (rejecting
defendants’ argument that “plaintiffs have a conflict in attempting to
represent TransOcean in seeking damages when at the same time they are seeking
to recover those same damages as shareholders” and explaining, “[w]ith respect
to the conflict of interest issue, the court agrees with plaintiffs.  It is well-settled that shareholders have the
right to bring direct and derivative actions simultaneously”).  

Sands’ reliance on In
re Bank of America Corp. Securities, Derivative & ERISA Litig.
, Nos. 09
MD 2058 (PKC) etc., 2010 WL 5248815 (S.D.N.Y. Dec. 14, 2010) is wholly
unpersuasive, particularly in the face of clear and binding Ninth Circuit
authority.  There, the court relied
exclusively upon New York case law.  2010
WL 5248815, at *1-2; cf. In re Bank of America Corp. Securities,
Derivative & ERISA Litig.
, Nos. 09 MD 2058 (PKC) etc., 757 F.Supp.2d
260, 344 n.21 (S.D.N.Y. 2010) (same).  Even
more importantly, the federal court’s decision was based on the fact that there
appeared to be a conflict because the company was the principal defendant in
the individual action, as well as being named a nominal defendant in the
separate derivative action.  The federal
court found the filing of the derivative action one year later was cause for
concern that the plaintiff possessed “a willingness to cast aside a derivative
claim, if it is the slower and weaker horse.” 
Id. at *3. 

Unlike in In re Bank
of America,
here, Plaintiff has alleged no claims directly or derivatively
against the Company, which is only a nominal defendant.  Thus, there can be no conflict of
interest.  Sands’ argument is simply a
manufactured issue with no basis in fact or law.  The clear language of the Amended Complaint
alleges that the Company’s proxy statements were issued and disseminated by and
in the name of the Board, Am. Complt. ¶¶ 170-71.  Counsel’s attempt to insert claims against
Sands in the Complaint that Plaintiff has not alleged and has no intention of
alleging, is simply sleight of hand.

Moreover, there is no
question as to the zealousness of Plaintiff’s advocacy, and the lack of
conflict is even more pronounced than in fact patterns where simultaneous
prosecutions have been permitted. Kamerman v. Pakco Companies, Inc., No.
76 Civ. 3912-CSH, 1978 U.S. Dist. LEXIS 19700, at *5 n.3 (S.D.N.Y. Feb. 6, 1978);
Bertozzi v. King Louie Int’l, Inc., 420 F.Supp. 1166, 1179-80 (D.R.I.
1976).  At this stage of the proceedings,
there is not even the slightest potential or actual conflict of interest.  Should a potential conflict materialize, this
Court has sufficient authority to deal with any conceivable problems that may
arise.  Id. at 1180.

Bagdan v. Beck, 140
F.R.D. 650 (D.N.J. 1991), the other case cited by Sands, is also inapplicable.
 Bagdan involved a motion to
disqualify attorneys from acting as special counsel for a bankruptcy trustee in
a lawsuit asserting direct and derivative claims and where disqualification was
adjudged pursuant to professional conduct rules.  140 F.R.D. at 652-653.  Bagdan has no procedural or factual
application to this case. Not surprisingly, Sands cites to no other cases, much
less to Ninth Circuit authority, in support of its argument.  Thus, Sands’ attempt to have the Court
dismiss Plaintiff’s Section 14(a) derivative claim on this ground must also
fail.

  1. B.                
    The FCPA
    Allegations Should Not Be Dismissed Due To Pending Litigations

            Contrary
to Sands’ contention, the mere fact that the pending consolidated derivative
federal action entitled Moradi v. Adelson et al., Case Nos.
2:11-cv-00490 and its related state court action entitled Kleinschmidt v.
Adelson, et al.
, Case No. A-12-658749B, contain FCPA allegations, is
irrelevant to this case.  This Court
possesses the inherent power “to control the disposition of the causes on its
docket with economy of time and effort for itself, for counsel, and for
litigants.” Landis v. North American Co., 299 U.S. 248, 254, 57 S. Ct.
163, 81 L. Ed. 153 (1936).  Generally, “‘the pendency of an action in the state court is
no bar to proceedings concerning the same matter in the Federal court.’“ Colorado
River Water Conservation Dist. v. United States
, 424 U.S. 800, 817, 96 S.
Ct. 1236, 47 L. Ed. 2d 483 (1976) (citation omitted). 

The U.S. Supreme Court promulgated the
abstention doctrine whereby federal courts, in exceptional circumstances,
may abstain from exercising jurisdiction in favor of concurrent and parallel
state proceedings, when doing so would serve the interests of “wise judicial
administration, giving regard to the conservation of judicial resources and
comprehensive disposal of litigation.” Colorado River, 424 U.S. at 818.  However, the Ninth Circuit has emphasized
that “the Colorado River doctrine is a narrow exception to ‘the virtually
unflagging obligation of the federal courts to exercise the jurisdiction given
them.’“ Holder v. Holder, 305 F.3d 854, 867 (9th Cir. 2002) (quoting Colorado
River
, 424 U.S. at 817).   As the U.S.
Supreme Court stated: “We emphasize that our task in such cases as this is not
to find some substantial reason for the exercise of federal jurisdiction by the
district court; rather, the task is to ascertain whether there exist ‘exceptional’
circumstances, the ‘clearest of justifications,’ that can suffice under
Colorado River to justify the surrender of that jurisdiction.” Id. at
813. 

As discussed more fully below, the circumstances
in this case simply do not warrant a stay, let alone a dismissal, of the FCPA
allegations.

  1. 1.        
    The Colorado
    River
    Doctrine Does Not Apply To This Case

            As a
threshold matter, this case must be parallel to the pending state action for the
Colorado River abstention doctrine to apply.  Security Farms v.
Int’l Broth. of Teamsters, Chauffers, Warehousemen & Helpers,
124 F.3d
999, 1009 (9th Cir. 1997).  The
prevailing view is that “[t]wo suits are considered ‘“parallel” when
substantially the same parties are contemporaneously litigating substantially
the same issues in another forum.’“ Clark v. Lacy, 376 F.3d 682, 686
(7th Cir. 2004) (citation omitted); see also Great Am. Ins. Co. v. Gross, 468 F.3d 199, 209 (4th
Cir. 2006); Ambrosia Coal & Constr. Co. v. Morales, 368 F.3d 1320,
1330 (11th Cir. 2004); United States v. City of Las Cruces, 289 F.3d
1170, 1182 (10th Cir. 2002); Nakash v. Marciano, 882 F.2d 1411, 1416
(9th Cir. 1989).

            Here, Sands
brushes over this requirement as if it is a foregone conclusion that this
action is parallel to the pending state court action.  In fact, it is undeniable that the actions
are not parallel.  Not only does
Plaintiff assert this, but Sands, itself, acknowledged in its Response to
Plaintiff’s Notice of Related Action (Docket #12) filed on February 3, 2014,
that this case is “dissimilar” to Moradi (and, thus, to the parallel
state court proceeding) since it “involves different parties, different alleged
events, and different factual and legal issues.” 

Nonetheless, incredibly, Sands tries to carve
out the portion of the Amended Complaint containing the underlying FCPA
allegations, claiming those allegations are similar to the ones present in the
state action, and seeking for this Court to delete those allegations from the
Complaint.  As discussed more fully
below, there is no authority to support this request, and indeed, to the
contrary, the circumstances require this Court to exercise jurisdiction.

            The
pendency of a state claim based on even the same general facts, which is not
the case here, is not alone sufficient to apply the Colorado River
doctrine. Federated Rural Elec. Ins. Corp. v. Arkansas Elec. Coops., 48
F.3d 294, 297 (8th Cir. 1995). Besides the existence of numerous material
claims that are not present in Moradi or In re LVS, the
FCPA-related state claims in this case are far broader than those previously
alleged by Sands’ shareholders including, with respect to them, the ongoing
cover-up and stonewalling of the DOJ and SEC.

In this case, there are allegations of
wrongdoing that flowed specifically from the investigations of the Company’s
FCPA violations. This wrongdoing, which continues through the present, includes,
inter alia, (a) “stonewalling” those
investigations, (b) covering them up in SEC filings and reports to shareholders
and otherwise, and (c) carrying on negotiations with the SEC and DOJ by counsel
badly conflicted due to concurrent representation of the interests of both
Sands and others who are also targets of the investigations, such as Defendant
Adelson.  Am. Complt. 61-62, 66, 74-7, 96,
146-49, 154-5, 159-61, 163.

Moreover,
Plaintiff’s legal posture is unique inasmuch as he, unlike shareholders Moradi and
Kohanim, made a highly particularized pre-suit demand on the Board as required
by Federal Rule 23.1, on January 22, 2013. (“Demand Letter”)  Am. Complt. ¶ 142.  As a
demand-made action, Sokolowski is categorically different and will be analyzed pursuant
to wholly different legal standards than the two demand-futile actions.

Under
Delaware law, the source of substantial jurisprudence on the subject, the
distinction between the two types of cases has been made quite clear:

The focus of a
complaint alleging wrongful refusal of demand is different from the focus of a
complaint alleging demand futility.  The
legal issues are different; therefore, the legal standards applied to the
complaints are necessarily different.  A
shareholder plaintiff, by making demand upon a board before filing suit, “tacitly
concedes the independence of a majority of the board to respond.  Therefore, when a board refuses a demand, the
only issues to be examined are the good faith and reasonableness of its
investigation.”  When a shareholder files
a derivative suit asserting a claim of demand futility, hence demand excused,
the basis for such a claim is that the board is (1) interested and not
independent; and (2) that the transaction attacked is not protected by the
business judgment rule.

Levine v. Smith, 591 A.2d 194, 212 (Del. 1991) (internal
citations omitted). 

Demand-made
cases focus on the Board’s investigation and its response to the shareholder’s
demands.  Knopf v. Semel, No.
08-3658, 2010 U.S. Dist. LEXIS 35925, at *20-21 (N.D. Cal. Mar. 17, 2010) (the
only relevant question is whether the Board acted in an informed manner with
due care and in good faith).  As such,
the failure of the Board to make public any written report of the SLC or Audit Committee,
is a significant factor for this action alone.  

Where, as here, there can be no dispute that the
claims in the federal and state actions are substantively different, courts
have deemed the proceedings not to be parallel. 
See, e.g., Hanover Ins. Co. v. Plaquemines Parish Gov’t, No.
12-1680, 2013 U.S. Dist. LEXIS 54935 (E.D. La. April 17, 2013) (court found
cases were not parallel where parties and issues differed); Fru-Con Constr.
Corp. v. Controlled Air, Inc
., 574 F.3d 527, 537 (8th Cir. 2009) (court
found cases not parallel where “the state lien foreclosure proceeding will not
dispose of the federal contract action and the sources of law, remedies sought,
elements of proof, review on appeal, and events giving rise to each cause of
action are different”).  See also Romine
v. CompuServe Corp.,
160 F.3d 337, 340 (6th Cir. 1998) (actions are
parallel only where they “are predicated on the same allegations as to the same
material facts”).

What is novel about Sands’ request is the fact
that the Company is not seeking to stay or dismiss any of the claims in the
present action, but rather is seeking to remove solely some of the FCPA factual
allegations, which form a partial basis for some of the claims.  Plaintiff is not aware of any case where the
court severed factual allegations from within any single claim due to the
presence of similar factual allegations in a pending state action.  To the contrary, the Ninth Circuit has made
it abundantly clear that the Colorado River doctrine does not apply
where there is “substantial doubt” that the state proceeding will resolve the
federal action.  Intel Corp. v.
Advanced Micro Devices
, 12 F.3d 908, 913 (9th Cir. 1993); see also
Gulfstream Aerospace Corp. v. Mayacamas Corp.,
485 U.S. 271, 277 (1988) (Colorado
River
does not apply unless the district court has “full confidence” that
parallel state proceeding will end the litigation).

In light of the material procedural, legal, and
factual differences between the cases, the Colorado River abstention
doctrine is not applicable, and Sands’ motion to dismiss the FCPA allegations
should be denied.

  1. 2.        
    There is No
    Basis for Granting Dismissal

Sands inappropriately advocates for dismissal
(rather than stay) of some of the FCPA allegations.  The Ninth Circuit has held that “district
courts must stay, rather than dismiss, an action when they determine that they
should defer to the state court proceedings under Colorado River.” Coopers
& Lybrand v. Sun-Diamond Growers of CA
, 912 F.2d 1135, 1138 (9th Cir.
1990).   A stay is preferable to
dismissal because it “ensures that the federal forum will remain open if, for
some unexpected reason, the state forum proves to be inadequate.” Attwood v.
Mendocino Coast Dist. Hosp.
, 886 F.2d 241, 243 (9th Cir. 1989) (quotation
omitted).  A stay also will “conserve
court resources” and avoid the risk of “mak[ing] premature and speculative
legal findings about the preclusive effect of various possible state judgments
in choosing between a stay and a dismissal.” Id. at 245. 

Sands argues that dismissal of some of the FCPA
allegations is warranted because (1) the FCPA claim is derivative; (2) the
federal action could threaten the Company’s position in separate lawsuits and
investigations; and (3) prior lawsuits are pending for a long time.  None of these reasons provide “the clearest
of justifications” which would “warrant dismissal.”  Colorado River, 424 U.S. at 818-819.

The Company does not cite to one case whereby
this Court or any federal court dismissed an action for the reasons cited by
Sands.  While In re Ormat Techs., Inc.,
2011 WL 3841089 (D. Nev. Aug. 29, 2011), discussed the concern that prosecution
of the federal action could conflict with defense of the parallel state action,
the result there was staying the federal action, not dismissing it.  Likewise, neither Lambrecht v. O’Neal (In
re Merrill Lynch & Co.)
, 773
F. Supp.2d 330, 348-49 (S.D.N.Y. 2011), nor In re E.F. Hutton Banking
Practices Litig.
, 634 F. Supp. 265, 270 (S.D.N.Y. 1986), both relied upon
by Sands, address whether such concern is a basis for dismissal pursuant to Colorado
River
.  Those cases merely found that
it was reasonable for a board to decide not to pursue litigation out of concern
that witnesses may be undermined.

Sands cites to just two cases whereby a federal
court actually dismissed a federal action under the Colorado River abstention
doctrine, and both cases are distinguishable. 
In Goldfein v. Brown, No. 10-1955, 2010 U.S. Dist. LEXIS 132251
(N.D. Ill. Dec. 10, 2010), the Northern District of Illinois dismissed the
federal action, which was duplicative of the state action, where substantial
discovery already occurred.  The Goldfein
court cited to a Seventh Circuit case where a state court proceeding already
had ruled in favor of the defendants, and the judge was certain that all of the
issues in federal court were resolved by the state action.  The circumstances in this case are far
different since the federal action presents very different issues than the
state action, no discovery has been conducted in the state action after 3 ½
years, and Sands concedes that the state action would not resolve any of the
federal claims.  Under such
circumstances, there is simply no basis warranting dismissal.

Likewise, it is clear that this Court dismissed
Mr. Hussein’s action in Hussein v. Fushi Copperweld, Inc., No. 10-699,
2011 U.S. Dist. LEXIS 38773 (D. Nev. Apr. 7, 2011), because it was identical to
the state court litigation, and this Court determined that the state court was
in a better position than the federal court to resolve all of the claims.  No such circumstances are present here.  As stated above, this action is legally and
factually different than the state court proceeding, and the state court
proceeding will not be able to resolve most of the claims presented here.  Thus, there is absolutely no basis for
dismissing any of the FCPA allegations as made by Plaintiff in this case.

  1. C.               
    The Board’s Rejection Of Plaintiff’s Pre-Suit Demands Was Wrongful And Is
    Not Protected By The Business Judgment Rule

As a shareholder
derivative action, this lawsuit seeks to protect the interests of the Company
from the “misfeasance and malfeasance” of its directors.  Kamen v. Kemper Fin. Servs., 500 U.S.
90, 96 (1991).  Under the business
judgment rule, the Board is presumed to have “acted on an informed basis, in
good faith, and in the honest belief that the action was taken in the best
interests of the company.” Aronson v. Lewis, 473 A.2d 805, 812 (Del.
1984), overruled on other grounds by Brehm v. Eisner, 746 A.2d 244 (Del.
2000).  It is indisputable, as the
Individual Defendants already have acknowledged, that the business judgment
rule does not apply in this action.

  1. 1.        
    The Business Judgment Rule Does Not Apply

Sands incorrectly claims
that, as a matter of law, by making demand, Plaintiff invoked the presumption
of the business judgment rule.  However,
in so arguing, Sands ignores the “overwhelming authority” that “the business
judgment rule is highly fact dependent, and therefore, inappropriate for
consideration on a motion to dismiss.”  FDIC
v. Baldini
, No. 12-7050, 2013 U.S. Dist. LEXIS 162033, at *27-28 (S.D. W.
Va. Nov. 14, 2013).[4] Given
the foregoing authorities, Sands “cannot shield themselves from liability based
on the business judgment rule at this early stage” of the litigation.  Baldini, 2013 U.S. Dist. LEXIS 162033,
at *31.

Additionally, only
actual decisions made by the Board can be protected by the business judgment
rule.  Levine v. Smith, 591 A.2d
194, 212 (Del. 1991).  Once Plaintiff
made his demand, the Board was required either to investigate the matter and
decide upon an appropriate course of action or reasonably decide to delay an
investigation.  Allison v. General
Motors Corp
., 604 F. Supp. 1106, 1117 (D. Del. 1985).

Here, Plaintiff
alleges, and Sands concedes, that other than the FCPA allegations, no investigation
of the bulk of Mr. Sokolowski’s demands was ever conducted; indeed, these
claims were not even considered by the Board. 
Am. Complt. ¶¶ 146, 153, 156, Motion at p.19. Where, as here, the Board
refuses to investigate the demands, the Board’s decision is not afforded the
protection of the business judgment rule. 
Allison, 604 F. Supp. At 1117; Levine, 591 A.2d at 212.

As to the FCPA
allegations, Plaintiff has alleged more than sufficient particularized facts to
rebut the presumption of the business judgment rule.  The D.C. Circuit Court reiterated the
applicable standard for overcoming the business judgment rule in Millennium
Square Residential Ass’n v. 2200 M St. LLC
, No. 11-1632, 2013 U.S. Dist.
LEXIS 96327 (D.D.C. July 10, 2013):

[T]he business judgment rule does not apply where the
officers or directors ‘lack independence relative to the decision, do not act
in good faith, act in a manner that cannot be attributed to a rational business
purpose or reach their decision by a grossly negligent process that includes
the failure to consider all material facts reasonably available.  Id. at *30-31 (citations omitted).  See also Krasner v. Moffett, 826 A.2dd
277, 287-88 (Del. 2003).

As discussed more fully
below, besides the fact that the Audit Committee itself was impermissibly
tainted (Am. Complt. ¶¶ 146-7. 154-55),
the Board’s delay tactics with respect to Plaintiff’s FCPA allegations have
been so egregious that they can only be characterized as bad faith.

  1. 2.        
    The Board’s Rejection Of Plaintiff’s FCPA Allegations
    Was Wrongful

A plaintiff may not
simply second guess the wisdom of a business decision substantively. However, Delaware
courts have made clear that a shareholder may overcome the business judgment
rule by alleging that the process applied by the board in making a business
decision was so egregious as to constitute corporate waste.  Gagliardi v. Trifoods Int’l, Inc., 683
A.2d 1049, 1053 (Del. Ch. 1996). In other words, a plaintiff may overcome the
presumption that directors acted in good faith by showing that the decision was
“so far beyond the bounds of reasonable judgment that it seems essentially
inexplicable on any ground other than bad faith.” Parnes v. Bally Entm’t
Corp
., 722 A.2d 1243, 1246 (Del. 1999) (en banc).

Here, Sands initially
referred Plaintiff’s FCPA allegations to the Audit Committee, which had been
authorized years earlier, on June 10, 2011, to respond to an SEC subpoena and
DOJ inquiry concerning Sands’ operations in Macau, and was designated as an SLC
on July 26, 2011 with its responsibilities expanded to investigate the
allegations in MoradiAm. Complt. ¶¶ 146, 151. While the Board’s referral to the
Audit Committee may have been rationally made, it was not done in good faith.

At the time of
Plaintiff’s demand, the Audit Committee’s investigation, whatever it had been,
had been virtually completed.  The Board
already provided a preliminary report to the NGCB in August 2012, Am. Complt. ¶ 73, and had disclosed to
the SEC in December 2012 of likely FCPA violations, Am. Complt. ¶¶ 74, 147. 
Despite Mr. Bookin’s representation to the Court that the Audit
Committee’s report would be finished by January 2013, Sands repeatedly has delayed
the timing of the conclusion of the SLC investigation and the issuance of a
final report for years in order to protect Defendant Adelson in connection with
ongoing DOJ and SEC negotiations.  Am. Complt. ¶¶ 76-77.   

After years of claiming
the Audit Committee investigation was still ongoing, Sands now admits the
investigation has been completed.  Despite
the completion of the Audit Committee investigation, there has been no
communication from the Board, Audit Committee, or their lawyers regarding any
decision by the Board with respect to Plaintiff’s demands.  Indeed, as recently as July 8, 2014,
Plaintiff’s counsel, Richard D. Greenfield, made the following request of
Daniel Bookin, counsel to the Audit Committee:

It has been
approx. 10 months since we have had any contact. In that regard, although we
regard our client’s demands as having been constructively rejected for the
reasons set forth in his Complaint, I feel obligated to inform the Court as to
whether the Sands Audit Committee is still functioning as an SLC, whether it is
currently investigating my client’s claims, whether your firm is still representing
the Audit Committee and whether I will ever receive a response to my client’s
demands.  Please provide me with an update so that I can provide accurate
information to the Court. Additionally, if the Board or its Audit Committee has
any plans to respond to my client’s demands, please provide me with your/its
best estimate as to when I might receive a response.

 

See e-mail of July 8, 2014 attached hereto as Exhibit “A”.

On July 11, Mr. Bookin
acknowledged the request but refused to provide any of the information
requested, maintaining that it was discovery. Moreover, the Board has come up
with a different stall tactic. Sands now argues that Plaintiff’s FCPA
allegations were not constructively rejected but rather are being deferred
indefinitely until the other derivative litigations and the government
investigations are resolved.  Motion at
19-20.  This claim is particularly disingenuous
given the fact that, at the very same time, Sands seeks to dismiss these very
same allegations claiming they are duplicative of Moradi and In re
LVS
.[5]  Such motion provides further evidence that
Plaintiff’s demands have been, de facto, rejected.

In the context of these
facts, this Court must evaluate whether the SLC was disinterested and
independent, and whether the methods and procedures it employed to conduct its
investigation were reasonable.  See,
e.g., Hasan,
729 F.2d at 379 (holding that the SLC’s “investigation lacked
the thoroughness which is necessary for a truly objective and meaningful
recommendation”) see also Auerbach v. Bennett, 393 N.E.2d 994,
1001 (N.Y. 1979); Zapata Corp. v. Maldonado, 430 A.2d 779, 788 (Del.
Supr. 1981). 

Sands urges this Court
to ignore Plaintiff’s particularized allegations of the Audit Committee’s “whitewash”
investigation, claiming that there is no factual basis to support the claim
that the investigation has not been thorough or conducted in good faith.  While it is true that an adequate
investigation may be evidenced by a “comprehensive and well documented” report,
Kaplan v. Wyatt, 484 A.2d 501, 519-20 (Del. Ch. 1984), the burden to
produce such report is on the Board, not on the shareholder.  Gamoran v. Neuberger Berman LLC, 536
Fed. Appx. 155, 158 (2d Cir. 2013) (“providing a thorough summary of the board’s
process and reasoning” was required); Ryskamp v. Looney, No.
10-cv-00842-WJM-KLM, 2011 U.S. Dist. LEXIS 98644, at *38-39 (D. Colo. Sept. 1,
2011) (ordered production of interview memoranda to determine the vigor with
which the review committee pursued its investigation).

As the Northern
District of California explained in City of Orlando Police Pension Fund v.
Page
, No. C 13-2038, 2013 U.S. Dist. LEXIS 139904, at *24-25 (N.D. Cal.
Sept. 26, 2013):

In the absence of the court’s or plaintiff’s own
review of the report itself, the court cannot find that the investigation was
conducted reasonably and in good faith. 
Defendants essentially ask plaintiff and the court, via the [demand
refusal letter], to “take their word for it” regarding the thoroughness of the
report.”  

By not making public
the Audit Committee’s report, Am. Complt. ¶ 161, “defendants have effectively
insulated its investigation from any scrutiny, which is unreasonable,” and that
makes the Board’s refusal of the demand unreasonable.  City of Orlando Police Pension Fund, 2013
U.S. Dist. LEXIS 139904, at *21. 

The Board provides no
rational excuse for not making public the Audit Committee report and the
results of its investigation.  The fact
that the government investigations remain pending is irrelevant to any finding
of the Audit Committee.  Indeed, the
Audit Committee has finished its work. 
As of October 2013, the Audit Committee is no longer overseeing the
Company’s responses to the SEC subpoena and related government investigations.
Am. Complt. ¶ 161. 

If, presumably, the
Audit Committee’s investigation was thorough and proper, and the Board adopted
the recommendations of the Audit Committee to improve the Company’s financial
controls and books and records, then the Company would face no risk in
disclosing the details of the internal investigation.  The very fact that the Board is wary of
providing this highly material information in the face of the still pending
government investigations, and in light of Plaintiff’s allegations that the
Board has been “stonewalling” the government investigations, is further
evidence of bad faith.  

Additionally, there is
no validity to Sands’ comment that “if there was any genuine concern that LVS
had improperly delayed disclosure of the Audit Committee investigation, one
would expect it to arise in the predecessor derivative cases.”  Motion at p.23.  First, those shareholders have not prosecuted
those cases vigorously, but rather have repeatedly voluntarily agreed to
continuously stay the cases for years on end.[6]  Second, as discussed above in Section II.B.1, only in demand-made cases such as this one is the failure of the
Board to make public the written report a significant factor.  

Based on the foregoing,
it is undisputed that the Audit Committee investigation concluded and did not
include most of Mr. Sokolowski’s claims; that no SLC report has been made
public; that as of October 2013, the Audit Committee is no longer overseeing
the Company’s responses to the SEC subpoena and related government
investigations; that the timing of the conclusion of the SLC investigation and
the issuance of a final report repeatedly and continuously had been delayed for
years now in order, inter alia, to protect Defendant Adelson in
connection with ongoing DOJ and SEC negotiations; that the Board has engaged in
numerous stall tactics with respect to responding to Plaintiff’s FCPA
allegations; that the Board has been disingenuous in its de facto
rejection of Plaintiff’s FCPA demands. 
These facts, taken together, lead to the indisputable conclusion that
the Board’s rejection of Plaintiff’s pre-suit demands was wrongful.

  1. D.               
    The Complaint States Valid Claims For Violation Of Section 14(a)

To state a claim for
Section 14(a) violation, a plaintiff must allege: (1) that a proxy statement
contained a material misrepresentation or omission, which (2) caused the
plaintiff injury, and (3) there is an essential link between the proxy
solicitation itself and the harm alleged. 
New York City Employees’ Retirement System v. Jobs, 593 F.3d
1018, 1022 (9th Cir. 2010); Desaigoudar v. Meyercord, 223 F.3d 1020,
1022 (9th Cir. 2000).  Plaintiff more
than adequately satisfies these requirements.

While Sands focuses on
alleged misrepresentations in Sands’ 2013 and 2014 Proxy Statements, they
conveniently ignore all of the omissions of the most material facts from them.  The Proxy Statements failed to disclose, in
non-pejorative language, the nominated directors’ participation and/or
acquiescence in the Company’s violations of, inter alia, the FCPA, BSA,
the Sands’ Board of Directors Corporate Governance Guidelines, the Audit
Committee Charter, the Anti-Corruption Policy and the Code of Business Conduct
and Ethics. Am. Compl. 183-84.  Nor did
it disclose the continued wrongdoing including the cover-up of the federal
investigations in SEC filings and reports to shareholders, the constant
stalling of the conclusion of the SLC investigation, and the refusal to
publicize the SLC report. Id.  Such facts could have been disclosed in
neutral terms in the proxy statements and the Board chose not to do so.

Plaintiff also alleges
the necessary “essential link” between the false Proxy Statements and the
challenged corporate actions. 
Specifically, the Complaint alleges that Sands’ proxy violations
proximately caused Plaintiff to suffer “direct and indirect economic and other
damages following the 2013 and 2014 Annual Meeting.  Complt. ¶ 204.  The material omissions directly harmed the
Company by keeping the Board’s longstanding non-compliance with the law in
place.  While the amount of damages “cannot
be presently determined,” this allegation satisfies the “short and plain
statement” and “fair notice” requirements. 
Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 346
(2005). 

Where, as here,
equitable relief is sought, and the election of the directors, and the
retention of PWC are directly attacked, the transaction causation requirement
is met.  See, e.g., Gaines v. Houghton,
645 F.2d 761, 776 (9th Cir. 1981) (proper analysis shifts from causation to
materiality where equitable or declaratory relief is sought for election of
directors alleged to have been facilitated by nondisclosure of underlying
wrongdoing); Berkman v. Rust Craft Greeting Cards, Inc., 454 F. Supp.
787, 793 (S.D.N.Y. 1978) (action seeking equitable relief for allegedly false
election proxy materials found to be essential link).

At the pleading stage,
to properly allege loss causation, Plaintiff need only satisfy the requirements
of Rule 8 and allege a plausible connection between Served Directors’ improper
conduct and Plaintiff’s damages.  In
re Zoran Corp. Der. Litig.
, 511 F. Supp.2d 986, 1015-16 (N.D. Cal. 2007)
(rejecting defendants’ loss causation arguments in a stock option backdating
action).  The Complaint alleges a
plethora of causal connections between Defendants’ improper conduct and the
damages to Sands and its shareholders by the corruption of the suffrage
process. While Sands argues that none of this is relevant because Defendant
Adelson and members of his family control a majority of Sands’ shares (and
therefore votes), it cannot seriously be disputed that even a substantial
minority voting against the Adelsons’ positions and the Board’s recommendations
can have a material impact on the Board and its future conduct of the Company’s
affairs.

III.       CONCLUSION

For the reasons stated above, and based on the authority cited, Plaintiff
respectfully requests that Sands’ motion to dismiss the Complaint should be
denied.  

 

Dated: October 22, 2014                                            /s/G.
Mark Albright                            

G.
Mark Albright

Nevada
Bar No. 1394

William
H. Stoddard, Jr.

Nevada
Bar No. 8679

Albright,
Stoddard, Warnick and Albright

801
S. Rancho Dr. D4,

Las Vegas, NV
89106

(702)
384-7111

gma@albrightstoddard.com

bstoddard@albrightstoddard.com

 

Richard
D. Greenfield 

(admitted
pro hac vice)

Marguerite
R. Goodman

Ilene F.
Brookler 

Greenfield
& Goodman, LLC

250
Hudson Street, 8th Floor

New
York, NY 10013

917-495-4446

whitehatrdg@earthlink.net

twowhitehats@earthlink.net

ibrookler@gmail.com

 

Scott
R. Shepherd

(admitted
pro hac vice)

SHEPHERD,
FINKELMAN, MILLER & SHAH, LLP

35 E.
State Street

Media,
PA 19063

Tel:
610-891-9880

sshepherd@sfmslaw.com

 

Rose
F. Luzon

(admitted
pro hac vice)

SHEPHERD,
FINKELMAN, MILLER & SHAH, LLP

401
West A Street, Suite 2350

San
Diego, CA 92101

Tel.:
619-235-2416

rluzon@sfmslaw.com

 

Attorneys for Plaintiff, W.A.
Sokolowski



 

Foreign Architectural Firms Doing Business in Nevada

 

        Trying to circumvent Nevada law by utilizing an employee as the strawman lien claimant, to pursue a lien for work performed by an architectural firm through its employee, as the real lienor and real plaintiff in interest, has previously been rejected by the Nevada Supreme Court. In Nevada National Bank v. Snyder, 108 Nev. 151, 157, 826 P.2d 560, 563-64 (1992) (partially abrogated by Executive Mgmt. Ltd. v. Ticor Title Ins. Co., 118 Nev. 46, 38 P.3d 872 (2002)), the holder of an option agreement to purchase certain ranch land, entered into a design agreement with an engineering firm to design a planned project thereon, which engineering firm, in turn, retained “Depner Architects & Planners, Inc.,” a foreign corporation not qualified or registered to do business in Nevada, to provide architectural services. When Depner Architects (the foreign corporation) sought to pursue a lien claim against the property, and its capacity to do so was challenged, it received district court permission to amend its complaint to name one of the firm members (named Depner) as the Plaintiff, to pursue the claim in his individual name, as though he had performed the work as a sole proprietorship.

     The Nevada Supreme Court reversed the district court, criticized it for having countenanced this ploy, and refused to recognize this sham, including because “(1) after [the foreign corporation] incorporated in Washington, all invoices were submitted . . . on behalf of the corporation; (2) the construction drawings for the proposed project were prepared by the corporation; (3) the individuals who worked on the drawings were employees of the corporation” etc. Snyder, 826 P.2d at 562. Thus, “the district court abused its discretion in allowing Depner [the individual] to substitute himself as an individual for the corporate entity . . . .” Id.

     The initial issue which prevented the foreign architectural firm from having capacity to sue in the Snyder case was that it had failed to qualify to do business in Nevada by registering with Nevada’s Secretary of State. The Snyder Court did not reach the question of whether Depner’s foreign firm was registered with the Nevada Architectural Board, or the issues which would be raised if it were not. The Court’s handling of the Secretary of State qualification issue was later abrogated in Executive Mgmt. Ltd. v. Ticor Title Ins. Co., 118 Nev. 46, 38 P.3d 872 (2002), which held that the proper method for dealing with that issue is to stay cases until the corporation complies with the requirement. Nevertheless, the Nevada Supreme Court’s answer to the more fundamental question, whether a lien may be pursued by an individual for his employer’s work has never been abrogated. Nevada’s licensing and registration requirements, which disqualify a foreign architectural firm from providing services and pursuing compensation for the same in Nevada if it is not registered with the State Architectural Board, are far more difficult to meet than merely qualifying a foreign corporation to do business with Nevada’s Secretary of State.

     Consequently it would be extremely difficult to allow a lien claim to be pursued in the name of an individual employee of an architectural firm when the evidence demonstrates that the foreign architectural firm was the entity which had actually performed the work and billed for the work and was the real lienor in interest. For example, on February 13, 2014, the Nevada Supreme Court issued its opinion in DTJ Design, Inc. v. First Republic Bank, a Nevada Corp., 318 P.3d 709, 130 Nev. Adv. Op. 5, in which the Court addressed other disqualifying factors, beyond those referenced in Snyder, which prevent foreign architectural firms from liening for services in Nevada if they have not registered with the Nevada Architectural Board, which opinion therefore clarifies the limited extent of the abrogation of Snyder.

     DTJ Design examined, among other provisions, NRS 623.349, which provides the methods which foreign firms should comply with if they want to be eligible to perform architectural and design work in Nevada, with the right to bill and lien for the same.

     The statute indicates in pertinent part as follows:

NRS 623.349 Formation of business organizations or associations with . . . unregistered or unlicensed persons: Conditions; limitations. 1. Architects . . . may join or form a partnership, corporation, limited-liability company or other business organization or association . . . with persons who are not registered or licensed, if control and two-thirds ownership of the business organization or association is held by persons registered or licensed in this State pursuant to the applicable provisions of this chapter, chapter 623A or 625 of NRS.

2. If a partnership, corporation, limited-liability company or other form of business organization or association wishes to practice pursuant to the provisions of this section, it must: (a) Demonstrate to the Board that it is in compliance with all provisions of this section. (b) Pay the fee for a certificate of registration pursuant to NRS 623.310. (c) Qualify to do business in this State. (d) If it is a corporation, register with the Board and furnish to the Board a complete list of all stockholders when it first files with the Board and annually thereafter within 30 days after the annual meeting of the stockholders of the corporation, showing the number of shares held by each stockholder [i.e., to ensure the 2/3 ownership requirement is met.] . . . . [Emphasis and bracketed explanatory language added.]

     The DTJ Design decision concluded that regardless of whether a foreign architectural firm employs a licensed Nevada architect, NRS 623.349(2) and NRS 623.357 still require that the foreign architectural firm itself be registered in Nevada in order for a mechanic’s lien action to be pursued on the firm’s behalf. DTJ was a Colorado architectural firm. Thomas Thorpe was a professional architect and one of DTJ’s three founding principals (but owned less than 2/3 of the entity, just as Steppan owned 0% of FFA). In 1998, Thorpe sought reciprocity to practice in Nevada and submitted two applications to the state board of architecture, one on his own individual behalf, and another on behalf of the corporate entity, DTJ. Only Thorpe’s individual application was received and approved. DTJ later recorded a notice of mechanic’s lien against Nevada real property for unpaid architectural services, and sought to establish that this lien had priority over an existing deed of trust recorded by First Republic Bank.

     First Republic successfully moved for summary judgment, since NRS 623.357 prohibited DTJ from maintaining its lien foreclosure action as DTJ had not registered with Nevada’s architectural board including under NRS 623.349. On appeal, the Supreme Court upheld this ruling, noting that, under NRS 623.357 no person may bring or maintain an action for compensation for architectural services without first “alleging and proving that such plaintiff was duly registered under this chapter at all times during the performance of such act or contract.” Thus, DTJ was required to plead and prove these required elements of a lien claim as its prima facie case, to obtain compensation for its Nevada architectural services, regardless of the nature of the affirmative defenses.

      In reaching this decision, the DTJ Design Court expressly ruled on and rejected many arguments raised to circumvent the statute.  For example, the DTJ Court ruled that NRS 623.349(2) precluded DTJ (as an unlicensed and unregistered firm) from foreclosing on a mechanic’s lien for work that was allegedly performed by one of DTJ’s individual architects, Thorpe, even though Thorpe was licensed in Nevada. In rejecting DTJ’s claim, the DTJ Court pointed out that Thorpe was not a 2/3 owner of the foreign corporation, as required by Nevada law for that entity to be allowed to register here, in order to provide services here.

     NRS 623.349(1) allows registered architects to partner with unregistered architects and form a business organization to practice in Nevada, so long as the registered architects satisfy a two-thirds ownership requirement. In order for a foreign business to operate as a separate entity in Nevada, it must satisfy the requirements found in NRS 623.349 by demonstrating to the board that registered architects within the firm satisfy the two-thirds ownership provision under NRS 623.349(1) and that the business is qualified to do business in this state and has paid the requisite registration fee under NRS 623.349(2)(a)-(c). DTJ at 6. (Emphasis added.)

     Thus, even if the Nevada Board had received DTJ’s application, it would have denied it “because Thorpe did not satisfy the two-thirds ownership requirement” of NRS 623.349(1). Id. The DTJ Court also expressly rejected any claim that Thorpe should individually be able to foreclose on the lien as a Nevada registered architect: “to the extent that DTJ argues that Thorpe should individually be able to foreclose on the lien as a registered architect, we disagree” including because Thorpe was not truly involved as a co-principal on the project for much of the time the project was undertaken. Id. at 6-7.

     Nevada’s architectural licensing statutes are aimed at protecting the Nevada public from the risks inherent from allowing foreign architectural firms, who are unwilling or unable to demonstrate their competence in working with local building codes and local site conditions (through the proscribed professional in-State registration process) from designing Nevada buildings, and to thereby “safeguard life, health and property.” NRS 623.010. See, e.g., Harrie v. Kirkham, Michael & Associates, 179 N.W.2d 413, 415 (N.D. 1970) (“We can find no valid reason for holding that the profession of architecture should be treated any differently from the professions of medicine, dentistry, or law”). This is particularly true in high rise projects. The Nevada Legislature has stated its intent to only allow firms which are registered in Nevada and are owned by at least 2/3 licensed Nevada architects, to perform architectural services for Nevada projects. Even if a firm claims it is only providing “design” services, and even if that claim were credible, it mut still be registered to do such work. NRS 623.180(1).

 

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on litigation, including commercial and tort (injury) matters.  

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services. Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established. 

 

 

Nevada Unemployment Appeal Guidelines

 

 

NRS 612.385 Discharge for Misconduct. A person is ineligible for benefits for the week in which he has filed a claim for benefits, if he was discharged from his last or next to last employment for misconduct connected with his work and remains ineligible until he earns remuneration in covered employment equal to or exceeding his weekly benefit amount in each of not more than 15 weeks thereafter as determined by the administrator in each case according to the seriousness of the misconduct.

 

GENERAL DEFINITION: Misconductoccurs when an employee deliberately and unjustifiably violates or disregards his or her employer’s reasonable policy or standard.  Misconduct can also
be found when an employee otherwise acts in such a careless or negligent manner
as to show a substantial disregard of the employer’s interests or the 10
employee’s duties and obligations to the employer. Disqualifying misconduct
must contain an element of wrongfulness. 

1. Absence from work or being late for work: An employee has the duty to report for work and remain at work in accordance with the reasonable requirements of the employer. If an employee is going to be absent from work, it is his or her responsibility to give proper
notice in time to permit the employer to make such arrangements as are
necessary to replace the employee. Not all absences are foreseeable, but if an
employee knows he or she is due at work and cannot report, say for illness, it
is the employee’s responsibility to inform the employer as soon as possible.
The reasonable policies of the employer are considered in determining what
adequate notice is.

 

a. Refused permission: It is reasonable for employers to require advance permission to be absent when the absence can be anticipated, for instance, in requests for vacations. However, a
prudent worker will not take time off when his or her request is refused. If an
employee is denied permission but is absent anyway, the necessity for the
absence and the employer’s reasons for not granting permission will be weighed.
The discharge will be considered misconduct if the employee is absent for
a capricious reason, or if the employee fails to provide a legitimate excuse
,
such as failing to provide a doctor’s statement in the case of illness, or if
the employee was absent due to intoxication. If an employee deliberately gives
a false reason to obtain time off and the employee knew it would not have been
approved if the employer knew the true reason for absence, a discharge for
dishonesty in these circumstances is for misconduct.

 

2. Duty to employer: An employee owes a duty to support and serve the employer’s interests and not to engage in acts or make statements that show disregard of the employer’s interests. Making inappropriate disparaging remarks that have the potential of harming the
employer, the supervisor, the product, or the service, may constitute
misconduct. Mere griping or normal complaints directed through proper channels,
such as the chain of command or through a grievance procedure, are not
misconduct unless it reaches the point of interfering with the work. 

 

b. Insubordination: Insubordination is a single or continuing refusal to obey a direct or implied order, reasonable in nature, and given by and with proper authority.  Insubordination may
include an act by the employee, which exceeds the authority granted to the
employee by his employer. Insubordination also includes statements or remarks
under circumstances that damage or tend to damage the employer’s interests.
 Finally, insubordination includes vulgar, profane, insulting, obscene or
offensive language directed at the employer or supervisor. If the language is
provoked and is an isolated instance, it may not be misconduct. 

 

c. Dishonesty: Engaging in dishonest acts or statements, or aiding another person to engage in such acts, which injures or tends to injure the employer’s interests is misconduct. Misconduct also covers an employee who willfully fails to report to the employer the dishonest acts or statements of a co-worker which causes substantial harm to the employer. Other acts of dishonesty include:

1. Theft and embezzlement.

2. Misappropriation of funds.

3. False statements on such items as work applications, time cards, travel expense claims or investigative reports.

4. False reasons for absences.

5. Malicious false statements about other individuals. 

 

e. Work Performance: An individual’s failure to perform work properly or neglect of duty is misconduct if he intentionally, knowingly, or deliberately fails to perform, or performs
in a grossly negligent manner, or repeatedly performs negligently after prior
warning or reprimand and in substantial disregard of the employer’s interests.
 It is not misconduct when the failure of performance is due to inability,
or if the action is ordinary negligence in isolated instances or are good faith errors in judgment or discretion.

 

f. Violation of employer rules: It is misconduct if an employee violates a rule, if the rule is reasonable and the individual knew or should have known the rule, and the violation substantially injures or tends to injure the employer’s interests. The violation may be
misconduct, even if it involved a minor matter, if the claimant had been given
prior warnings for violation of that rule or other rules. While the final incident is of   primary consideration in determining misconduct, a series of incidents, while not misconduct taken individually, may establish a pattern of behavior detrimental to the employer’s interests and become misconduct. It may not be misconduct if: (1) the
rule is either not enforced or enforced selectively, (2) the violation is condoned, or (3) the employer fails to follow his own policy of progressive discipline. Even if an employer  has a progressive discipline policy, a single act, such as willful dishonesty, may be considered sufficient to support termination.

 

3. Relations with coworkers: An employer has a right to expect that his employees will not conduct themselves toward each other in a manner that will interfere unduly with the efficient
conduct of business. Incompatibility between workers will sometimes occur, but if it manifests itself in overt acts that could impair the efficiency of operations, the acts could be considered misconduct.

 

See State Appeal Guidebook on line.

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. The National Academy of Personal Injury Attorneys named Mark Albright as one of the Top 10 Personal Pnjury attorneys in Nevada in 2014. Our firm’s practice includes a strong emphasis on personal injury accidents. Call us at 702-384-7111.

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services. Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

 

 

 

 

 

 

 

Attorney Fees and Nevada Mechanic's Lien Statutes

 

G. MARK ALBRIGHT, ESQ.

Nevada Bar No. 001394

D. CHRIS ALBRIGHT, ESQ.

Nevada Bar No. 004904

ALBRIGHT, STODDARD, WARNICK
& ALBRIGHT

801 South Rancho Drive, Suite D-4

Las Vegas, Nevada  89106

Tel:      (702) 384-7111

Fax:     (702) 384-0605

gma@albrightstoddard.com

dca@albrightstoddard.com

Attorneys for
Applicants/Defendants

 

 

IN THE
SECOND JUDICIAL DISTRICT COURT OF THE STATE OF NEVADA

 

IN AND FOR
THE COUNTY OF WASHOE

 

 

JOHN ILIESCU, JR., et al., Applicants,

 

vs.

 

MARK B. STEPPAN, Respondent.

CASE NO.          CV07-00341

(Consolidated w/CV07-01021)

 

DEPT NO.           10

 

 

MARK B. STEPPAN,

 

                                    Plaintiff,

 

vs.

 

JOHN ILIESCU, JR. and SONNIA ILIESCU, as Trustees of the JOHN
  ILIESCU, JR. AND SONNIA ILIESCU 1992 FAMILY TRUST AGREEMENT; JOHN ILIESCU,
  individually; DOES I-V, inclusive; and ROE CORPORATIONS VI-X, inclusive,

 

                                    Defendants.

REPLY POINTS AND
  AUTHORITIES IN SUPPORT OF

DEFENDANTS’ MOTION FOR
  RELIEF FROM COURT’S ATTORNEYS’ FEES AND COSTS ORDERS AND FOR CORRECTION,
  RECONSIDERATION, OR CLARIFICATION OF SUCH ORDERS TO COMPLY

WITH NEVADA

MECHANIC’S LIEN LAW

 

 

            COMES
NOW, JOHN ILIESCU, JR., and SONNIA ILIESCU, individually and as Trustees of the
JOHN ILIESCU, JR. AND SONNIA ILIESCU 1992 FAMILY TRUST AGREEMENT (jointly
hereinafter the “Iliescu Defendants” or “Movants”), as the Defendants in the
second of the two cases consolidated into this Case No. CV07-00341, and, hereby
file these Reply Points and Authorities in Support of their prior Motion, filed
herein on September 15, 2014, for clarification or relief from certain of the
language in this Court’s September 5, 2014 Costs Order and especially in its
September 8, 2014 Attorneys’ Fees Order. 
These Reply Points and Authorities are filed in response to Plaintiff
Steppan’s Opposition to that Motion filed on September 25, 2014, and as further
support for the request that this Court indicate that the amounts awarded in
its prior court orders are not required to be paid by Defendants, but are
adjudicated as awarded on the Plaintiff’s lien, and as part of the lienable
amount thereof.

REPLY POINTS AND AUTHORITIES

            Movants’ motion sought clarification
and correction from this Court of any language in the Court’s Costs and Fees
Orders which might be inaccurately construed, so as to ensure that the award of
attorneys’ fees and costs set forth in those Orders comply with Nevada’s
mechanic’s lien statutes and are not treated as the basis for any personal
judgment against the Defendants, but as applying to the calculation of the
amount of the Plaintiff’s mechanic’s lien. 

I.          Statement of Facts and Overview of
Relief Sought In Subject Motion.

            This lawsuit (the second of the two
suits consolidated in this matter) was brought by Plaintiff Mark Steppan
(“Steppan”) via a Complaint which listed only one cause of action, foreclosure
of a mechanic’s lien (the “Mechanic’s Lien” or “Lien”) asserted by Steppan
against certain real property (the “Property”) as described therein, owned by
the Iliescu Defendants, the only named Defendants.

            The Lien arose from services
performed by Steppan’s employer, a California architectural firm known as
Fisher, Friedman and Associates (“FFA”), not registered or licensed to perform
architectural services in Nevada, and solely owned by Rodney Friedman, a
California licensed Architect, on behalf of a customer, and its assignee
(sometimes jointly referred to in these proceedings  as “BSC/Consolidated”) who had signed a
purchase agreement to purchase the Washoe County Nevada Property from the
Iliescus, which purchase never closed. 
FFA had directed its employee, Steppan, its sole Nevada-licensed architect,
to execute the subject contracts with the customer to provide architectural
services for a planned multi-use development (“Wingfield Towers”) at the site,
upon which no construction ever commenced, and the Lien and lien foreclosure
lawsuit was asserted and prosecuted by FFA (and then by Friedman, upon FFA
being sold) in Steppan’s name (in order to circumvent Nevada laws which
prevented FFA, as a non-Nevada registered architectural firm, owned by less
than 2/3 Nevada architectural licensees, from claiming a mechanic’s lien for
what were clearly FFA services, provided and billed directly to FFA’s customer,
who in turn, paid FFA directly, as the customer’s true contract architect in
all but name.) 

            On May 28, 2014, this Court entered
its “Findings of Fact, Conclusions of Law and Decision” (hereinafter its
“Decision”) setting forth various findings of fact and conclusions of law, and
upholding the validity of the “Steppan” lien for the architectural services
provided by Steppan’s California employer, FFA, through FFA’s non-Nevada
licensed owner and through FFA’s (not Steppan’s) California employees and
through FFA’s (not Steppan’s) hired subcontractors, relating to the proposed
development at the Property which never took place.  Defendants contend that this Decision was
seriously flawed on a variety of grounds, including because Steppan did not
meet his burden of proof on the prima facie elements of his claim, such as by
proving that the lien was for services which he performed, as alleged in Paragraph 9 of his Complaint, and as
required by Nevada’s mechanic’s lien statutes, which indicate that the value of
a lien must be based on the services provided “by or through the lien claimant”
(NRS 108.222(1)(a) and (b)), not “by” the lien claimant’s employer “through”
that employer’s employees and subproviders. 
Defendants therefore intend to file a motion to alter or amend the
Court’s rulings, or for new trial, after this Court’s Judgment enters, in
accordance with the timing provisions of NRCP 52 and 59.

            The instant motion does not relate
directly to those matters, however, and, instead, assumes arguendo that the
Court’s Decision and pending Judgment will be upheld, in which case the
Iliescus are entitled to relief from this Court’s recently entered “Order Regarding
Plaintiff’s Motion for Costs” (hereinafter the “Costs Order”), and its “Order
Regarding Motion for Attorneys’ Fees” (hereinafter the “Fees Order”) which
Orders will presumably be incorporated into this Court’s anticipated Judgment
as components of the Plaintiff’s Mechanic’s Lien to be upheld and allowed to be
foreclosed on thereby.

            As explained in Defendants’ Motion,
certain of the language in these Orders is disconcerting to the Defendants, as
such language could potentially be construed to mean that the costs and fees
awarded against the Iliescus are not merely a component of the “Steppan” lien
claim against the Iliescus’ Property, but form the basis for personal liability
on the Iliescus’ part, should the value of the Property be insufficient to pay
the lien in full.  Steppan has filed an
Opposition to this Motion, in which he essentially concedes that the relief
sought in the motion should be granted, and that the Orders should be revised
to clarify that the costs and fees awarded thereunder are part of the
lien.  Nevertheless, this Opposition also
repeatedly indicates that any concession that the Iliescus are not personally
liable for the costs and fees is merely applicable “at this stage of the
litigation” (Opposition at p. 5), while holding out, via this phrase and other
arguments, the possibility that they may become so in the future (albeit
without offering any legal support for this contention arising out of the
Plaintiff’s sole pled claim).

            Accordingly, Defendants’ Motion
should be heard and ruled on at this time, in full and on the merits, rather
than deferred, as Plaintiff seeks, for another day.  This Court should clarify that any awards
against the Iliescus entered herein, including the pending judgment, relate
solely to the amount of the lien as a matter of law, and do not relate to any
purported claim for a judgment against the Defendants (rather than against
their real property) individually or as trustees of their trust.

            In support of their Motion,
Defendants demonstrated that the plain language of Nevada’s mechanic’s lien
statutes did not support a contention that the owner of property subject to a
lien is somehow rendered personally liable for the value of that lien in excess
of the amount thereof, especially when the lien claimant would otherwise have
no basis for a claim against the property owner individually. 

            More particularly, NRS 108.237, the
provision which allows costs and fees to be awarded to a prevailing lien
claimant, notes that those fees and costs are to be awarded “on its lien” in the same manner that
the lienable amounts remaining due and owing to the lien claimant are to be
awarded on the lien claimant’s lien, not as a separate claim. The amounts
ascertained as due and owing are then to be collected via a foreclosure sale of
the property subject to the lien, pursuant to NRS 108.239(10), which provides:
“On ascertaining the whole amount of the
liens with which the property is
justly chargeable
, as provided in [the mechanic’s lien statutes], the court
shall cause the property to be sold in satisfaction of all liens and the costs
of sale, including all amounts awarded
to all lien claimants pursuant to NRS 108.237
[the statute under which
costs and fees are awardable to a lien claimant]” via the same type of process
used for a judgment execution sale. NRS 108.239(10) [emphasis added].

            If the amounts obtained from the
lien are insufficient to satisfy the lien claim, then the lien claimant’s
original contractual customer may still be pursed for that residue, if that
customer has been named in the original suit: 
“Each party whose claim is not satisfied in the manner provided in this
section is entitled to personal judgment for the residue against the party
legally liable for it if that person has been personally summoned or has
appeared in the action.”  NRS
108.239(12).

            As pointed out in the Defendants’
Motion, there is nothing in the Nevada lien statutes or in any Nevada case law
which would suggest that the “person legally liable for” the residue in the
case of a deficiency is the property owner, who can somehow magically become
personally liable for a debt for which he did not contract, and with respect to
which his property may be liened only by operation of statute.   See,
e.g., J.D. Constr. Inc. v. IBEX Int’l Group LLC
, 126 Nev. Adv. Op. 36, 240
P.3d 1033, 1041 (2010) (in construing the lien statutes,  “both the property owner and the lien
claimant's rights must be addressed” correctly.) The correct reading of the
statute is also upheld by relevant Nevada case law set forth in the Defendants’
Motion.

            In response to this Motion,
Plaintiff contends that no final ruling on this question should issue from this
Court at this time since the matter is simply not “ripe” and will not become
ripe until some point hereafter, upon the lien foreclosure sale being conducted
and a determination of the sales price being known.  Further, Plaintiff argues that the case law
cited by the Defendants has somehow been misinterpreted or is inapposite.  Finally, Plaintiff contends that he should
now be able to amend his pleadings (almost 8 years after the fact) to bring an
unjust enrichment claim against the Iliescus, in order to continue to threaten
them with possible personal liability herein on a contract to which they were
not parties, and Steppan himself was only a nominal sham party.  Each of these contentions is addressed, in
turn, below.

II.        Legal Analysis and Response to
Plaintiff’s Opposition Brief Arguments.

            A. 
Ripeness.

            Plaintiff first contends that this
issue is simply not ripe for adjudication and will not be ripe until some
future date when the lien foreclosure sale has occurred.

            This claim fails.  Plaintiff’s Lawsuit set forth but one cause of action, for lien
foreclosure.  Discovery has been
completed and a trial has now been held with respect to that one cause of
action.  Plaintiff filed no motion prior
to trial seeking to bifurcate any aspects of his claims from any other aspects
of his claims.  The trial has been
completed and both parties are now entitled to know exactly what the full scope
of the final outcome of that trial may be, including for purposes of knowing
what issues now need or do not need to be appealed.  Although it is true that post-judgment
enforcement proceedings take place after a lien foreclosure judgment enters,
including as to any fees or costs incurred therein, no rule of Civil Procedure
requires that any legal questions
germane to the underlying case or which will be applicable during such
enforcement proceedings must be deferred. 

            This issue is ripe for adjudication
and needs to be resolved now.  This is
demonstrated by the very fact that it keeps coming up, now, prior to any
foreclosure sale.  Defendants, for
example, previously filed a motion for stay of execution, which, through the
cooperation of the parties, has been postponed for the time being, but not
indefinitely.  This motion contended, as
will any future motion upon expiration of any stipulated postponement now in
place, that no supercedeas bond should be required to be posted in support of
any stay of execution pending appeal or pending post-judgment motions, as the
lien on the property in effect fulfills the role of such a bond, and its value
cannot in any event be exceeded by any collection against the property owners,
on claims of personal liability.

            Likewise, the very fact that the
present motion needed to be filed, due to concerns about the language of the
Court’s orders, which concerns would not have arisen if this issue had already
been resolved, demonstrates that this issue is ripe and ought to be addressed
now, so that it can be appealed if necessary without any further required
proceedings or motions thereon.

            Plaintiff is clearly seeking to
postpone a ruling from this Court on this issue because Plaintiff (1) knows
that he must necessarily lose on this issue, as he has cited no authority for
any contrary position to that asserted by Defendants, but (2) nevertheless
wishes to hold this issue in abeyance, so that he can continue to utilize the
threat of future possible personal liability over the heads of the Iliescus for
whatever leverage it might give him in settlement discussions, such as those
which will be mandated under Nevada Rules of Appellate Procedure during any
appeal of this action.  Plaintiff’s
strategy in this regard is, quite frankly, cruel.  The Iliescus are in their 80s and 90s.  They should have a right to know the full
extent of any liabilities they currently face so they can get their affairs in
order before they pass away, without having their final days marred by worry
over the loss of any of their life savings, if any, which have been kept free
from this property and this litigation. 
Nevada law specifically recognizes that the elderly are entitled to
speedy adjudication of pending claims to avoid just such unfortunate dilemmas
from causing them worry and concern in their later years.  NRS 16.025(1).

            B. 
Case Law.

            Contrary to the assertions raised in
the Opposition brief, none of the cases cited by Movants have been misstated,
nor do they involve facts having “nothing to do” with the present matter.  Indeed, they could not be more closely on
point.  The case law in Nevada (and,
also, in other neighboring states), has repeatedly indicated that the owner of
real property subject to a statutory lien is not personally liable for any
deficiency, merely because his land is subject to the lien as security for the
claim, absent some other basis for the owner to be held personally liable, such
as because he was personally a party to the contract.  This Court has already ruled in this case in
its Decision that no such contract existed between the owner and the lien
claimant.  Decision at page 4, lines 4-5.

            Plaintiff contends that Didier v. Webster Mines Corp., 49 Nev.
5, 234 Pac. 520 (1925) is inapplicable due to its date, vis-a-vis the 1965
enactment of Nevada’s modern mechanic’s lien statute.  However, Nevada Supreme Court case decisions
on this question of personal liability continued to cite to pre-1965 decisions
after that year, as shown, for example, by one of the quotes from the Snyder decision set forth below,
suggesting that this is a generally applicable and axiomatic principle, as of
course it is: a defendant cannot be
liable without any basis for a claim against such defendant.  Moreover, Plaintiff’s contention that Didier does not stand for the
proposition for which it is cited, is false. 
It is true that the case involved other facts and other issues which
have been recited in Plaintiff’s Opposition brief.  But that does not negate the fact that Didier included the following applicable
ruling:

It
was error . . . for the court to render a personal judgment against the
appellant [Didier, the owner of the mine in question] for [certain of the
respondents’] services [those which were upheld as lienable].  There is no evidence to show that in
contracting for their services Bray [who managed the site] was acting as the
agent in fact for the appellant, thus rendering [appellant landowner]
personally liable upon general principles of law.  If he was the statutory agent the effect of
his acts in employing labor could only operate to charge appellant’s property
with a lien for such services as were of a lienable character, and could not
charge appellant with any personal liability.

 

Id. at 524.

            While agency law may
have changed in the intervening years, the applicable legal theory at issue
herein remains the same: if a claimant’s only basis for involving a defendant
in a lawsuit is that the defendant owns property subject to a plaintiff’s lien,
that lien, in and of itself, does not allow for personal liability.

            Also, contrary to
Plaintiff’s claims, the case of Nevada
National Bank v. Snyder
, 108 Nev. 151, 157, 826 P.2d 560, 563-64 (1992)
(partially abrogated on other grounds by Executive
Mgmt Ltd. v. Ticor Title Ins. Co.
, 118 Nev. 46, 38 P.3d 872 (2002)), could
not be more applicable.  Steppan’s claim
that it has “nothing to do” with the present controversy could not be more off
base.

            In Snyder, the holder of an option agreement to purchase certain
Nevada ranch land, entered into a design agreement with an engineering firm to
design a planned project thereon, which engineering firm, in turn, retained
“Depner Architects & Planners, Inc.,” a foreign architectural firm, to
provide architectural services.  When
Depner Architects (the foreign corporation) sought to pursue a lien claim
against the property, which was in Nevada, it realized that, as a foreign
entity, it had a problem which prevented it from suing for a Nevada lien for
work involving Nevada property.  Its
solution to this problem was precisely similar to the solution which FFA came
up with here, when it was faced with a similar problem: to claim this wasn’t
the foreign firm’s lien, it was one of the firm’s individual member’s liens![1]  Therefore, the firm received district court
permission to amend its complaint to name one of the firm members (named
Depner) as the Plaintiff, to pursue the claim in his individual name, as though
he had performed the work as a sole proprietorship.  The Nevada Supreme Court reversed the district
court, criticized it for having countenanced this sham ploy, and refused to
recognize the individual’s lien, given that the lien was in fact for work which
had been done, not by him, but by the foreign corporation (just as it will
likely do with respect to Steppan’s lien having been upheld herein), including
because  (1) after a relevant point in
time, all invoices were submitted on behalf of the corporation, not Depner the
individual, just as, in this case, all of the post AIA execution invoices, in
the amounts later claimed on the lien, were submitted on FFA Letterhead, as
will be discussed in greater detail in Defendants’ anticipated Motion to Alter
or Amend; (2) the construction drawings for the proposed project were prepared
by the corporation, not the individual, named as Plaintiff; (3) the individuals
who worked on those drawings were employees of the foreign corporation, not of
the individual member, just as, in the present case, FFA’s employees, and not
anyone working as a W-2 Employee of Steppan, created the drawings.  Snyder,
826 P.2d at 562.  Thus, “the district
court abused its discretion in allowing Depner [the individual] to substitute
himself as an individual for the corporate entity . . . .”  Id.  This element of the Snyder case will obviously be focused on more completely in the
Defendants’ upcoming motion to alter or amend this Court’s rulings upholding
“Steppan’s” lien for FFA’s and its employees’ work, to be filed after Judgment
enters herein.

            With respect to the
present issues, as to personal liability beyond the amount of the lien obtained
from a sale of the property, in the course of reaching its decision, the Snyder Court ruled against the very
assertions which were improperly raised by Steppan in his Trial Brief and which
have been reiterated in Steppan’s Opposition. 
Contrary to Steppan’s assertion that Snyder
“has nothing to do” with liability for a post lien foreclosure deficiency,
including under NRS 108.239(12), the issue of such a deficiency was directly
discussed in the Snyder Court’s
opinion, based on the same contention having been raised therein which Steppan
raises here, that the owner of real property subject to a lien is liable for
any “residue” or balance owed to the mechanic’s lien claimant, not able to be
satisfied through the mechanic’s lien foreclosure sale.  The Court could not have been more firm in
rejecting this contention, explaining as follows:

The
district court judgment stated that [mechanic’s lien claimants] were entitled
to a “personal judgment for the residue against the [property owner].”  The [owner] asserts that the remedy to
enforce a mechanic's lien is to force a sale of the property and that it is not liable for any deficiency if
the monies from the sale do not cover the amount of [the lien claimants’]
liens.  We agree.

 

In
Milner et al. v. Shuey, 57 Nev. 159,
69 P.2d 771 (1937), this court stated that there
must be a contractual relationship
regarding the furnishing of labor and
materials between the party foreclosing
the lien and the party against whom personal liability is sought
.  This court stated:  “[S]uch a relation is essential to establish personal liability against the owner of the
property
in addition to a judgment foreclosing a lien. . . .”  Id.
at 179, 69 P.2d at 772. . . .

 

It
is unjust to hold the [property owner] personally liable for a deficiency when it was not a party to the [lien
claimant/customer] contract
, and because the [property owner] is not the person liable for the debt under
NRS 108.238.

 

Nevada National Bank v. Snyder,
108 Nev. at 157, 826 P.2d at 563-64 (1992)(emphasis added) (partially abrogated
on other grounds by Executive Mgmt Ltd. v. Ticor Title Ins. Co.,
118 Nev. 46, 38 P.3d 872 (2002)).

            This case could not be
more on point.  Not only does it
establish that Steppan should never have been allowed to be treated as the lien
claimant for FFA’s work in the first place, such that the Iliescus’ property
should not even be subject to the “Steppan” lien in the first place, whether
for attorneys’ fees or underlying amounts due and owing on FFA’s invoices (a
point to be explicated more fully in the Defendants’ post-judgment motions,
once this Court enters its judgment), but it also establishes the invalidity of
any claim that, should that sham “Steppan” lien for money Steppan does not even
claim to be due and owing to him, survive post-judgment motions and appellate
review, the Iliescus cannot by any means be held personally liable
thereon. 

            This is not a startling
conclusion, but represents the correct understanding of the nature and purpose
and extent of mechanic’s liens as understood for decades, including in other
neighboring states.  See, e.g., Reeder Lathing
Co., Inc. v. Allen
, 425 P.2d 785 
(Cal. 1967)(“The part of the judgment that defendant is personally
liable to plaintiff is clearly erroneous.  In the absence of a contract between a lien
claimant and the property owner, the right to enforce a mechanic’s lien against
real property does not give rise to
personal liability
of the owner.”) [Emphasis added.  Chief Justice Traynor writing for a unanimous
California Supreme Court.]

            Likewise in the present case, this
court has already ruled that the Iliescus were not a party to the contract with
Steppan, in its Decision at Finding Paragraph 10.  As such, the theory that these Defendants can
somehow be made liable for the residue owed to Plaintiff beyond the value of
the lien, when they were not “the person liable for the debt” in the first
instance, and did not contract for the work, must fail, as based on a
non-tenable misreading of Nevada’s mechanic’s lien statutes, and the difference
between claims for liens on property, and claims of personal liability as
widely and universally understood for decades both in Nevada and elsewhere.

            C. 
Amendment to Include an Unjust Enrichment Theory.

            Plaintiff next contends that he
should therefore be able to amend his complaint, after trial, to allegedly conform with the evidence, in order to
include an unjust enrichment claim therein, even though no such claim was
asserted when his complaint was filed over 7 years ago, nor upon the expiration
of the deadline to move to amend thereafter, under the court’s scheduling
orders issued in this case.  This claim
should be denied on two grounds: (1) any such newly alleged theory would be
barred by the statute of limitations, and would be too late to now be filed
herein; and (2) there is no basis for an unjust enrichment claim in any event.

                        (1)  Timeliness Issues

            This request should be denied. 6A
Wright & Miller, Federal Practice and Procedure, § 1509, at pp. 205-06,
explains the following regarding Rule 15 motions to amend:

However, leave to
file a supplemental pleading after trial will be denied when it would have the
effect of reopening the case, when the matters alleged in the supplemental pleading
could be the subject of a separate action,
or when the content of the supplemental pleading might have been advanced at an
earlier time and there is no explanation for the delay
. [Emphasis added.]

 

            Plaintiff Steppan’s lien foreclosure
lawsuit was filed on May 4, 2007.  Now,
over 7 years later, and almost a year following trial, well after all
applicable statute of limitations for any new claims or theories or causes of
action have expired, Steppan may not be allowed to amend his complaint to
include a brand new cause of action against the Iliescu Defendants for personal
liability under a theory of unjust enrichment. 
The trial in this matter ended in December 2013, almost a year ago.  Clearly the new contentions are time barred
and could have been advanced for the first seven years of the law suit, and
there is no explanation for the almost 8 year delay in now advancing the claim
of personal liability for the first time. 
As the Nevada Supreme Court has stated:

[W]here an amendment
states a new cause of action that
describes a new and entirely different
source of damages
, the amendment does not relate back [for purposes of
overcoming an expired statute of limitations], as the opposing party has not
been put on notice concerning the facts in issue . . . . 

 

[Rule 15] does not
permit us to so liberalize limitation statutes when new facts, conduct and injuries
are pleaded, that the limitation statutes lose their meaning.

 

Nelson v. City of Las Vegas, 99 Nev.
548, 556, 665 P.2d 1141, 1146 (1983), quoting
Raven v. Marsh, 607 P.2d 654, 656
(N.M. Ct. App. 1980) (emphasis added).

                        (2)  Merits Issues.

            The claim that unjust enrichment
should be able to be pursued against the property owner is made so frequently,
as a workaround for lien claimants who realize their damages against a lien
claimant are limited to the value of the property, as to confirm the rule so
often sought to be worked around: that the mechanic’s lien statutes do not
allow for any personal liability against an affected property’s owner.  However, as frequently invoked as such claims
are, they are also frequently rejected. 
The Snyder Court, for example,
also rejected the argument that a property’s owner could be held liable
for a deficiency residue on some sort of “unjust enrichment” theory, noting
that mechanic’s lien claimants may not invoke such a theory without privity of
contract with the property owner, even where a benefit has been conferred:

            While
there was a benefit conferred
on the [property owner], it does not rise to
unjust enrichment. California has considered this question in Kossian v. American Nat. Ins. Co., 254
Cal.App.2d 647, 62 Cal.Rptr. 225 (1967). There, a building was destroyed by
fire. Kossian provided services to the owner for debris removal and was never
compensated for his services. American National Insurance Company obtained the
property when the owner assigned his interest to the insurance company. Kossian
sued the insurance company on a theory of unjust enrichment. After noting
that there was no privity of contract between Kossian and the insurance company
for work performed, the court stated that there was no unjust enrichment even though a benefit had been conferred
on the insurance company
. Id. at
648–49, 62 Cal.Rptr. 225.

 

            In the present case, any claim for
unjust enrichment is even weaker.  The
architectural plans which form the basis for the lien did not involve any
actual on-site work, or any actual on-site improvements, benefitting the
Iliescus’ property, after all was said and done.  While Steppan argues at page 8 of his
deposition that the entitlements benefitted the Iliescus, the project for which
those entitlements were obtained ultimately came to naught, including because
the entitlements obtained on the basis of those plans were subject to so many
conditions that financing for the project was unobtainable and the purchasers
never closed.  This demonstrates the
falsity of the claim that an “economically viable development plan” was
generated through Steppan’s work which benefitted the Iliescus or that it would
be “unjust” to allow the Iliescus to keep “gains” relating to the property
(Opposition at p. 8) especially where such property is now to be lost in any
event, offsetting any claimed gains.  The
instruments of service prepared by the architects belong to someone else (FFA
and Rodney Friedman), not the Iliescus. 
The Iliescus could not use or benefit from the architectural drawings
today even if they wanted to.

            Nor
would Steppan have standing to bring any unjust enrichment claim under this
theory, that the entitlements received through the architectural services
provided somehow enriched the Iliescus. 
The actual services provided to obtain the entitlements from Nevada
agencies were provided by FFA, not Steppan.  For example,
the submissions to Nevada governmental agencies to obtain those entitlements do
not list Steppan as the architectural contact person.  See,
e.g., the 154 page January 17, 2006
Special Use Permit Application to the City of Reno (Trial Exhibit (“TE”) 35;
Trial Transcript (“TT”) 764, 183-84), which provides:  “Person to Contact Regarding Application.
Name: Fisher Friedman Associates. Contact: Nathan Ogle, AIA.”  TE 35 at p. Steppan 2371.  Similarly, TE 36 (requesting an increase in
the condominium unit count) and TE 37 (for a further increase) also list “Nathan Ogle AIA,” with
FFA (not Steppan
nor someone who is with Steppan) as the person to contact
regarding the project, and do not even mention Steppan.  TT at pp. 763-764.

            Steppan admitted that there was no
reason for him to have been listed as the architectural contact person for the
project on documents submitted to governmental officials, since Ogle was the
project manager conducting daily operations for the architectural project (TT
at 764) and Friedman was the designer (TT at 766).  Steppan also admitted that he did not
participate directly in the requested changes of the condo unit counts (TT at
page 765) did not participate in the conversations regarding changes to project
parking (id.) did not attend any of
the hearings before the Reno City Council (TT at 769) and did not personally
make any of the revisions to the FFA firm’s instruments of service (TT at 767)
which were required to obtain the subject entitlements, now claimed to have
unjustly enriched the Iliescus.  Nor is
there any evidence that Steppan communicated with relevant Nevada governmental
agencies as part of the entitlements requests. 
Though there were many emails during the course of this project from
various FFA employees to the customer and to interested governmental entities,
Steppan could not find a single email that he had generated and sent to any person external from FFA relating to
this project. TT at 757-758.

            FFA, not Steppan, would be the only
entity with standing to pursue an unjust enrichment claim herein.  However, FFA was not the original Plaintiff
herein and cannot be named at this late date as a new Plaintiff, seeking now
injuries on the basis of new claims, without violating relevant statutes of
limitation.  Moreover, any attempt by FFA
to pursue a claim for unjust enrichment herein would be barred, given FFA’s
standing as a foreign architectural firm, not registered or qualified to
provide architectural services in Nevada and therefore barred from pursuing an
action for compensation for the same, in Nevada, on any theory under NRS
623.357.  See, e.g., DTJ Design Inc. v.
First Republic Bank
, 318 P.3d 709, 130 Nev. Adv. Op. 5 (2014) (upholding
summary judgment dismissal, under NRS 623.357, of foreign architectural firm
DTJ Design’s lien and its unjust
enrichment claims
, because the firm was not registered to provide such
services under NRS Chapter 623, and, even though it had a member who was
licensed to practice architecture in Nevada, the firm was not owned by over 2/3
licensees as required by NRS Chapter 623, to provide the services in alleged
association with this single employee/member).

            Moreover, the presumption that any
shortfall in the amounts adjudicated in favor of the lien claimant “on the
lien” in this action can be easily recovered by virtue of merely adding a claim
for personal liability against  the
Iliescus’ under an unjust enrichment theory is based on a false premise.  The damages for an unjust enrichment claim
would not be equivalent to the damages which this Court has indicated it will
award to the Plaintiff on his lien, based on the AIA Contract payment amounts,
which are flat fee percentage based amounts. 
If Steppan were allowed to amend his complaint at this late date to
include an unjust enrichment claim, the damages thereunder could not be based
upon the AIA Contract (as the claim would not be a breach of contract claim),
but would need to be based on some other lower measure of damages, such as the
quantum meruit value of the services provided (Asphalt Products v. All Star Ready Mix, 111 Nev. 799, 898 P.2d 699
(1995)), which would be offset by the higher award already obtained.

III.   
CONCLUSION

            For
the reasons set forth above, this Court should clarify its Costs Order and its
Fees Order to ensure that the language contained therein cannot be utilized by
Plaintiff to claim that the Defendants are required to individually or
personally or as trustees pay any costs or fees to the Plaintiff.  The Fees Order language, indicating that “it
is hereby ORDERED that Defendants shall pay” the attorneys’ fees awarded, is
especially concerning and misleading and could be utilized hereafter by Steppan
to seek a result contrary to Nevada law, which is why, in a timely manner under
Nevada law, before at some future date the language of that Order or the other
Order could be mis-utilized and misconstrued, the Defendants have now moved
herein for an Order of this Court clarifying the Costs Order and the Fees Order
in accordance with the requests set forth herein to comply with Nevada law.

            To the extent that any claim has
been made by the Plaintiff heretofore, or is made hereafter, which suggests
that any amounts awarded to the Plaintiff, including the amounts awarded by
this Court for fees and costs, creates any personal liability on the part of the
Defendants, or personal responsibility for them to make payments to the
Plaintiff, beyond the value of the Property subject to the Lien, to be
collected before or after a lien foreclosure sale of that Property, any such
contentions must be summarily rejected as a matter of law.  To the extent that any such rejected
contention finds any possible support in the language of any of the Orders of
the Court, that language should be corrected and clarified and for that reason
the Order(s) in question should be amended, to be consistent with Nevada law,
and the language indicating or implying that the Defendants are required to
personally pay costs or attorneys’ fees to the Plaintiff must be stricken from
the Orders. 

            DATED this _____day of September,
2014.

 

 

By_________________________________________

G. MARK
ALBRIGHT, ESQ., #001394

D. CHRIS
ALBRIGHT, ESQ., #004904

ALBRIGHT,
STODDARD, WARNICK &

    ALBRIGHT

801 South
Rancho Drive, Suite D-4

Las Vegas,
Nevada  89106

Tel:     (702) 384-7111 / Fax: (702) 384-0605

gma@albrightstoddard.com

dca@albrightstoddard.com

 



1The immediate problem faced
by the foreign architectural firm in Snyder
was that it had not qualified and registered itself with Nevada’s Secretary of
State to do business in Nevada.  The firm
would likely have had another problem as well, relating to its license to
perform architectural work in Nevada, but that issue was never reached or
addressed, perhaps because it was properly registered as a Nevada Architect
with the State’s licensing Board, or perhaps due to the parties’ and the
Courts’ review of the earlier preliminary issue.  The foreign firm’s workaround for its problem
was to claim that the lien was being pursued in the name of an individual
member of the firm, instead of in the name of the firm itself, since individuals
are not required to qualify and register with Nevada’s secretary of state to
sue here.  The Nevada Supreme Court later
abrogated its determination, in Snyder
and other cases, that failure to qualify and register to do business in Nevada
with the Secretary of State is fatal to a plaintiff’s claim, and that issue can
be dealt with today by staying a case until such qualification occurs.  However, the more important point reached in Snyder which was not later abrogated, is
on the question of whether an individual lien claimant can pursue a lien in his
name for work actually done by a corporation. 
On that question, Snyder
remains on point, as it does on the question of whether any excess amount owed
on a lien, but not recoverable from the sale of the liened property, can
somehow be asserted personally against the property’s owner.

Restated Demand for Jury Trial

 

G. MARK ALBRIGHT, ESQ.

Nevada Bar No. 001394

D. CHRIS ALBRIGHT, ESQ.

Nevada Bar No. 004904

ALBRIGHT, STODDARD,
WARNICK & ALBRIGHT

801 South Rancho Drive, Suite D-4

Las Vegas, Nevada  89106

Tel:      (702) 384-7111

Fax:     (702) 384-0605

gma@albrightstoddard.com

dca@albrightstoddard.com

Attorneys for
Applicants/Defendants

 

IN THE SECOND JUDICIAL DISTRICT COURT OF THE STATE OF NEVADA

 

IN AND FOR THE COUNTY OF WASHOE

 

JOHN ILIESCU, JR., et al., Applicants,

 

vs.

 

MARK B. STEPPAN, Respondent.

CASE NO.          CV07-00341

(Consolidated w/CV07-01021)

 

DEPT NO.           10

 

 

MARK B. STEPPAN,

 

                                    Plaintiff,

 

vs.

 

JOHN ILIESCU, JR. and SONNIA ILIESCU, as Trustees of the JOHN
  ILIESCU, JR. AND SONNIA ILIESCU 1992 FAMILY TRUST AGREEMENT; JOHN ILIESCU,
  individually; DOES I-V, inclusive; and ROE CORPORATIONS VI-X, inclusive,

 

                                    Defendants.

 

THIRD-PARTY
  PLAINTIFFS’ RESTATED DEMAND FOR JURY TRIAL ON THEIR THIRD-PARTY COMPLAINT

AND RELATED CLAIMS.

 

 

COMES
NOW, Defendants/Third-Party Plaintiffs, JOHN ILIESCU, JR., individually, and
JOHN ILIESCU JR. and SONNIA ILIESCU as Trustees of the JOHN ILIESCU, JR. AND
SONNIA ILIESCU 1992 FAMILY TRUST AGREEMENT, as the Third-Party Plaintiffs in
these proceedings and, pursuant to NRCP 38(b), hereby state as follows:

WHEREAS, the Third-Party Complaint alleging professional
malpractice, indemnity, and other claims against Third-Party Defendants,
CONSOLIDATED PACIFIC DEVELOPMENT, INC., a Nevada Corporation; DECAL OREGON,
INC., an Oregon Corporation; CALVIN BATY, individually; JOHN SCHLEINING,
individually; HALE LANE PEEK DENNISON AND HOWARD PROFESSIONAL CORPORATION, a
Nevada professional corporation, dba HALE LANE; KAREN D. DENNISON; R. CRAIG
HOWARD; and JERRY M. SNYDER was filed herein by the Iliescus on September 27,
2007; and

WHEREAS, the legal malpractice claims alleged in the
Third-Party Complaint against Hale Lane et
al
. were stayed twice, first by Stipulation dated March 7, 2008, and again
by way of Stipulation and Order filed herein on February 14, 2013, a copy of
which is attached as Exhibit “1”
hereto (which references the initial unfiled Stipulation); and

WHEREAS, the Iliescu Defendants originally filed their initial
Demand for Jury Trial herein on September 6, 2011, a correct copy of which is
attached as Exhibit “2” hereto,
which Demand remains in effect and is being restated nunc pro tunc herein for clarification purposes; and

WHEREAS, the Court entered an Order on August 23, 2013, a copy
of which is attached as Exhibit “3”
hereto, ordering that the trial on Plaintiff Mark A. Steppan’s lien foreclosure
lawsuit against the Iliescus as Defendants would be a bench trial,
notwithstanding the original Demand for Jury Trial filed by the Iliescu
Defendants; and

WHEREAS, that Order was, however, limited to the lien
foreclosure lawsuit trial and the claims against the Iliescus therein, and did
not apply to the malpractice, indemnity, and other third-party claims;

NOW THEREFORE, this Restated Demand for Jury Trial is filed
merely to reiterate and restate the Iliescu Defendants’ original Demand for
Jury Trial (filed herein on September 6, 2011) on the third-party claims still
pending against Hale Lane et al., and
to clarify for the record that said Jury Demand is still in effect, which
restatement is submitted in light of the many years which have transpired since
the Third-Party Complaint was originally filed herein on September 27, 2007,
and in order to ensure that there is no confusion on this point given the
intervening Order, which was of limited effect.

Accordingly:  The Iliescu
Defendants hereby restate their prior demand for a trial by jury of any issue
triable of right by a jury remaining in these proceedings, including, but not
limited to, theclaims of legal malpractice as well as the indemnity and other
claims which remain pending against the Third-Party Defendants named in the
Third-Party Complaint and in the amendment(s) thereto.

DATED this  _____day of
September, 2014.

 

 

By_________________________________________

G. MARK ALBRIGHT, ESQ., #001394

D. CHRIS ALBRIGHT, ESQ., #004904

ALBRIGHT, STODDARD, WARNICK

   & ALBRIGHT

801 South Rancho Drive, Suite D-4

Las Vegas, Nevada  89106

Tel:     (702) 384-7111 / Fax:  (702) 384-0605

gma@albrightstoddard.com

dca@albrightstoddard.com

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