Subscribe via E-mail

Your email:

Browse by Tag

Follow Me

Albright Stoddard Blog

Current Articles | RSS Feed RSS Feed

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

Opposition to Motion for Summary Judgment and NRCP 56(f) Request for Discovery

 

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’
  OPPOSITION TO THIRD-PARTY DEFENDANT HALE LANE’S RENEWED MOTION FOR SUMMARY
  JUDGMENT REGARDING THIRD-PARTY CLAIMS; AND COUNTERMOTION TO AMEND THIRD-PARTY
  COMPLAINT AND FOR ADDITIONAL DISCOVERY UNDER NRCP 56(f)

AND
  RELATED CLAIMS.

 

 

            COMES NOW, Third-Party Plaintiffs,
JOHN ILIESCU, JR., and SONNIA ILIESCU, individually and as Trustees of the JOHN
ILIESCU, JR. AND SONNIA ILIESCU 1992 FAMILY TRUST AGREEMENT (hereinafter
“Third-Party Plaintiffs” or “the Iliescus” or “Iliescu”), and hereby oppose the
Motion filed on September 4, 2014, by Third-Party Defendant, HALE LANE
(hereinafter “Third-Party Defendant” or “Hale Lane”), renewing a Motion for
Summary Judgment regarding the third-party claims of the Iliescus against
movant for legal malpractice. 
Third-Party Plaintiffs’ Opposition is made and based upon the below
Points and Authorities in support hereof.

            Third-Party Plaintiffs also hereby
countermove for additional time to conduct discovery pursuant to NRCP 56(f), on
the basis and grounds set forth herein, and the affidavit attached hereto.
Furthermore, Third-Party Plaintiffs hereby countermove for leave of court to
file an Amended Third-Party Complaint, in substantially the form attached
hereto and referenced herein, to be pursued upon the Third-Party malpractice
claims against Hale Lane becoming ripe for adjudication, which claims are not,
currently, ripe, either for adjudication, or for consideration of Hale Lane’s
Renewed Motion for Summary Judgment.

            These Countermotions are made and
based upon the Points and Authorities set forth below, any exhibits and
affidavit referenced in or attached hereto, all papers and pleadings on file
with the Court, and any argument of counsel at any hearing of this matter.

            DATED this _____day
of September, 2014.

 

 

 

By_________________________________________

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

 

 

C. NICHOLAS PEREOS, ESQ.

Nevada Bar No. 0000013

1610 Meadow Wood Lane, Suite 202

Reno, Nevada 89502

Tel:     (775)
329-0678

Attorneys
for Applicants/Defendants

 

 

POINTS AND
AUTHORITIES IN OPPOSITION TO THIRD-PARTY DEFENDANT HALE LANE’S RENEWED MOTION
FOR SUMMARY JUDGMENT

REGARDING THIRD-PARTY CLAIMS

 

I.    STATEMENT OF FACTS

            This action arises out of an
agreement entered into by the Iliescus to sell certain property in downtown
Reno to a potential purchaser which intended to develop the property for a
high-rise mixed use condominium project known as Wingfield Towers.  As part of that transaction, Karen Dennison
of the Hale Lane Law Firm was retained by the Iliescus to represent their
interests in preparing certain Addendums (initially, a Third Addendum, and then
subsequently, a Fourth Addendum) to the purchase agreement by and between the
Iliescus and the buyer/would-be developer (herein referred to as
“BSC/Consolidated” or buyer or purchaser). 
An Addendum No. 3 to the purchase agreement was therefore drawn up on
behalf of the Iliescus, by their counsel Hale Lane.  Exhibit
“1” hereto
.  This Addendum included,
at Paragraph 1, a modification of certain terms relating to any extensions of
the close of escrow date.  The Addendum
also included, at Paragraph 7, an indication that obtaining the necessary entitlements
from the relevant government agencies, including any required height, set-back,
or other zoning variances, and any required special use permit, or zoning
changes, master plan amendments, etc., was a condition precedent to the
parties’ obligations under the purchase agreement, which entitlements were
required to be obtained by the buyer, “at buyer’s expense” and also noted the
potential future involvement of an architect as that process progressed, at
paragraph 8(1).

            Based on these and other provisions,
Karen Dennison/Hale Lane knew, or should have known, at the time this Addendum
was drawn up, that architectural and design services would eventually be
commencing with respect to the project, as necessary to allow the project to go
through the entitlements process.  Since
Nevada law allows architects and other providers of offsite design services to
lien real property for their services, even though those services do not
involve onsite work (which put the Iliescus at special risk of having their
property liened before any financing was in place to ensure that potential lien
claimants were being paid for the work they claimed to be doing), Hale Lane had
a duty to include language within this Addendum No. 3 which would protect the
Iliescus from such liens.  Moreover, Hale
Lane had the perfect opportunity, within this Addendum, to address this issue,
specifically in the Paragraph 1 terms relating to escrow closing date
extensions.  For example, those extension
dates could have been made contingent and conditioned upon the architect
providing progress payment lien releases for all work performed to date through
the date of any extension, in addition to or in lieu of the other conditions
for such extensions set forth therein. 
Also, the Addendum could have required the establishment of a
construction control account to ensure any design professionals were being
regularly paid and signing unconditional progress payment lien releases, etc.,
or could have required the buyer to inform the seller before entering into such
contracts, with a right to review and approve the same, so the seller could be
protected against onerous provisions therein, and could timely record a notice
of non-responsibility, etc. 

            However, no such provisions were
included within this Addendum No. 3 as a result of Hale Lane’s negligent
malpractice.  Instead, Hale Lane merely
included some boilerplate language about the duty of the buyer to protect and
indemnify the seller from liens against the property, which language is
essentially worthless with respect to potential mechanic’s lien claims, since
the whole point of such liens is to ensure the provider of services has
security for payment, if the party with whom he contracted cannot pay (in which
event that same party will obviously also be unable to pay on an indemnity
obligation).  Nor did Hale Lane take the
simple expedient of informing the Iliescus to record a notice of
non-responsibility.

            The buyer/developer,
BSC/Consolidated, sought out an architect to help obtain the entitlements, namely,
the California architectural firm of Fisher Friedman Associates (“FFA”), which
was not registered or licensed with Nevada’s Architectural Board under NRS
Chapter 623, to provide the subject services. 
FFA, rather than taking the necessary steps to become registered as a
firm entitled to perform architectural work in Nevada, chose to instead
circumvent Nevada’s licensing requirements by simply having one of its
employees, Mark Steppan, who happened to be licensed in Nevada, sign the
contracts with the buyer, as though he were the contract architect for the
project, with FFA eventually deciding to pretend it was the designer for the
project, which arrangement was in violation of Nevada law, including without
limitation, NRS 623.180(1) (requiring Nevada registration by architect or designer doing Nevada work) and NRS
623.349 (requiring that, in order for any such FFA-Steppan association to be
valid, the foreign entity and/or the joint venture formed between the two must
be owned 2/3 by Nevada licensed architects, which was not true of FFA or of any
purported FFA-Steppan association).  See, DTJ
Design, Inc. v. First Republic Bank
, 318 P.3d 709, 130 Nev. Adv. Op. 5
(2014).

            The potential buyer of the Iliescus’
land (BSC/Consolidated) at some point in time retained the same Hale Lane law
firm which was representing the Iliescus as sellers, to provide assistance to
the buyer, with regard to the buyer’s attempts to obtain developmental
approvals from the relevant Washoe County governmental entities for the project
to be performed.  Hale Lane accepted this
employment as counsel for the buyer, thus placing itself in the highly unusual
and troubling role of concurrently representing both the buyer and also the
seller on this multi-million dollar land acquisition and development
transaction.  Apparently, Hale Lane had
already begun this representation of the buyer in reviewing a potential
contract between the buyer and the architect, concurrently with Dennison’s work
on Addendum No. 3, without advising the Iliescus.  See,
Trial Transcript (“TT”) at p. 813, l. 20 through p. 815 l. 3, attached as Exhibit “2” hereto.

            Hale Lane determined that it could
overcome its direct, obvious, and concurrent conflict of interest in
representing both the buyer for the Property and the seller for the Property in
the same multi-million dollar transaction by merely having a short conflict
waiver letter executed.  This conflict
waiver letter, dated December 14, 2005, and attached as Exhibit “3” hereto, contained only four brief paragraphs of
explanatory text, which simply indicated the identity of the parties which the
firm currently represented and wished to now also represent (although it
appears that Hale Lane may have already begun the representation of the buyer
prior to the date of this conflict waiver letter), and asked for consent to
such representation, and a waiver of the conflict.  The letter utilized language which gave the
impression of a routine request, without providing any of the detail necessary
to ensure that the conflict was only being waived with informed consent, as
required by Nevada’s Rules of Professional Conduct.  For the reasons set forth more fully in the
legal analysis section of this brief, this letter was inadequate as a matter of
law, and contained inconsistent and false advice and counsel which was itself
an act of malpractice.

            Upon information and belief, the
Hale Lane law firm came to be intricately involved in the buyer’s attempts to
obtain necessary entitlements for the project. 
Based thereon, the Hale Lane firm became aware of the nature of
architectural services being provided at the project by FFA, ostensibly through
its Nevada licensed employee, Steppan, who would later assert “on behalf of”
FFA, a mechanic’s lien “against Iliescu’s property,” in excess of $1.75 million
dollars.  See Hale Lane’s admitted facts on pg. 6, ll. 13-14 of Movant’s
Renewed Motion for Summary Judgment, and see,
Exhibit “4” hereto, Steppan’s final
lien notice, at page 4.  Questions of
fact remain on which discovery is needed with respect to the full extent of the
services provided by Hale Lane to Consolidated/BSC during this time period, the
information it learned, and how that information could have and should have
been utilized to assist and protect the Iliescus as clients of the Hale Lane
law firm.  Steppan would later argue, in
a successful motion on his lien claim, that Hale Lane’s knowledge should be
imputed to the Iliescus, even though Hale Lane had never shared this knowledge
with the Iliescus.

            During this time period, as admitted
in the Hale Lane Renewed Motion, the Iliescus granted an extension to the close
of escrow date to the buyer, thereby providing the buyer with more time to
purchase the property than was originally allotted.  See,
Movant’s Renewed Motion at pg. 5, line 28 through pg. 6 line 2.  Bizarrely, Hale Lane did not warn the
Iliescus to hold off on agreeing to this extension until the potential
mechanic’s lien threat had been dealt with. 
Instead, on or about September 18, 2006, Hale Lane prepared Addendum No.
4 on behalf of the Iliescus, which allowed for this extension, and told the
Iliescus to sign it, which bad advice was an act of malpractice.  Exhibit
“5”
hereto.  By the time this
Addendum No. 4 was prepared, Hale Lane’s other work on the project had been
sufficiently substantial for Hale Lane to be even more aware of the facts of
the project, and the manner in which those facts potentially impacted the
Iliescus, for even further and stronger duties to have arisen on the part of
Hale Lane to advise the Iliescus of those facts and their implications, and to
use the opportunity afforded by the buyers’ request for this extension, to
protect the Iliescus.

            Notwithstanding these facts, Hale
Lane:

            -(including in conjunction with
preparing the Addendums) never advised the Iliescus that architectural services
being performed in order to obtain the entitlements for the project created the
possibility that the Iliescus’ property could be liened by the architect;

            - never advised the
Iliescus that unlike other states, many of which only allow actual on-site
works of improvement to form the basis of a mechanic’s lien, Nevada allows
liens for off-site architectural, engineering, and design services;

            - did not inform the
Iliescus that it would be essential for them to take steps to attempt to
mitigate against this potential lien threat, such as by filing a notice of
non-responsibility, or taking other protective measures;

            - did not inform the
Iliescus that they should not agree to any time extensions of the escrow date
(such as those referenced in Addendum No. 3 or allowed under Addendum No. 4)
unless, as a condition of any such extension, the buyer obtained and provided
to the Iliescus unconditional progress payment lien releases signed by the
architect and all other design professionals indicating that they had been paid
in full for all services performed to date as of the time of the execution of
the escrow extension, and would not be claiming any liens for any services
performed and paid for prior thereto, utilizing the forms allowed under NRS
Chapter 108;

            - did not inform the
Iliescus that obtaining such unconditional progress payment lien releases was
especially important in this case, due to the potential, under the discussions
held to date by and between the Architect and the buyer, that a flat fee AIA
contract might come to exist which might be claimed by the Architect to
retroactively apply to allow increased new retroactive billings for (and thus
an increased lien amount for) work already completed and paid for under prior
hourly contracts, such that unconditional progress payment lien releases would
prevent the Architect from later claiming it could send new replacement
invoices for astronomically higher flat-fee-percentage rates, superseding
already paid invoices, which is exactly what the Architect later did;

            - did not inform the
Iliescus of Hale Lane’s own in-house knowledge as to the terms of the potential
AIA contract negotiated or reviewed by other lawyers in the firm;

            - did not advise the Iliescus that,
in order to protect themselves they needed to obtain from the buyer a copy of
any and all agreements which the buyer proposed to or had entered into with any
architectural firm, design firm, or similar service provider, together with all
invoices and payments on such invoices, in order to allow the Iliescus to
finally become sufficiently informed as to the nature of any potentially
threatened lien (which advice, had it been given, could have informed the
Iliescus of the urgent need to ensure that they must not extend the escrow
until and unless they obtained appropriate agreements from the architect
expressly agreeing that any flat fee agreement would not be rendered effective
until financing had been secured for the project, as it would be better to allow
the sale to be cancelled, as it was anyway, than to allow the Architect to
become vested in his alleged ability to lien on a percentage based flat fee
contract based on the cost of a project which never even commenced on site);

            The buyers ultimately defaulted, as
they were unable to obtain the necessary financing for the project and
therefore declined to complete the sale. 
Mark Steppan then recorded a mechanic’s lien, nominally in his name, but
in fact on behalf of FFA, as supported by invoices which were sent from FFA
which recognized that earlier payments had been made directly to FFA.  Upon the filing of this lien, realizing how
poorly it had represented the Iliescus’ interests, and in order to protect
itself from the risks which it had subjected itself to, via its unusual
concurrent representation of both the buyer and the seller on this subject
transaction and via its failure to advise Dr. Iliescu, during its
representation of the Iliescus, how he might be protected during the
entitlements process, from mechanic’s liens which might arise as a result of
that process, Hale Lane frantically attempted to nominally protect the Iliescus
so as to protect Hale Lane from being sued by the Iliescus for Hale Lane’s
malpractice.  However, the representation
which Hale Lane offered during this time period was also sub par and
inadequate, continuing the prior pattern. 

            Hale Lane first sought and obtained
an indemnity agreement, whereby the purchasers would indemnify the Iliescus
from any harm suffered by the Iliescus as a result of the lien.  See,
facts admitted at pg. 6, ll. 22-26 of Hale Lane’s Renewed Motion for Summary
Judgment.  This indemnity agreement was,
however, not worth the paper on which it was written, as the parties who were
obligated thereunder were without the financial resources necessary to meet
their obligations.  Hale Lane should,
instead, have advised the Iliescus to obtain their own new counsel at that
time, who might perhaps have negotiated for Hale Lane’s execution of such an
indemnity of their former client, to avoid a malpractice claim.

            Hale Lane also asked for a second
conflict letter to be signed by the buyer and the seller, a true and correct
copy of which is attached as Exhibit “6”
hereto, promising that Hale Lane would act to resolve the Mechanic’s Lien filed
by Steppan, a promise which Hale Lane never kept, and, on information and
belief, did not adequately attempt to keep.

            Hale Lane then filed an Application
on behalf of the Iliescus, dated February 14, 2007, for the release of Steppan’s
lien.  This Application was, at best, a
half-hearted effort, only five (5) pages in length, and relying solely on two
theories:  that Steppan’s lien was not
valid because Steppan had failed to provide a statutorily required 31-day
pre-lien notice that work was being provided by an architectural firm for the
project, and was invalid due to the lack of any 15-day pre-lien notice as
required for residential projects. 
Despite Hale Lane’s extensive knowledge of the strange contracts with
California entity FFA’s employee, for hourly fee work which was complete before
the flat fee AIA Agreement was signed, with a purportedly retroactive date, and
despite the excessive amount of the lien against property on which not a single
shovel’s worth of work was ever done, Hale Lane did not attack the amount of
the lien as excessive, under NRS 108.2275. 
The first of the two theories which were addressed, was ultimately
rejected by the Court, including after the lien claimants argued that Hale
Lane’s knowledge of this architectural work should be imputed to the
Iliescus.  See Brent Adams June 22, 2009 Order attached as Exhibit “7” hereto at pg. 2, lines 6-9
and 25-28.  The Iliescu Defendants
continue to believe that this theory should not have been rejected and do not,
by anything stated in this brief, waive their right to continue to pursue that
belief in post judgment motions and on appeal of the Steppan lien claims.[1]

            Nevertheless, it is highly ironic
that Hale Lane’s Renewed Motion goes on at great length to make the case that
the 31-day pre-lien notice argument was not a winning or a strong argument for
the Iliescus to be making in order to avoid the lien.  Rather, Hale Lane, in its Renewed Motion, now
argues, extensively, that the protections which would have been afforded to the
Iliescus, had they obtained a pre-lien notice and then acted to protect
themselves by filing a notice of non-responsibility thereafter, would have been
ineffective as the Iliescus allegedly could not claim the status of
disinterested owners in any event, such that, even if they had obtained a
pre-lien notice of right to lien from Steppan, and had timely acted thereafter
to quickly record a notice of non-responsibility, this would have been
unavailing to them.  See, e.g., Hale Lane’s
Renewed Motion at p. 12, ll. 26-27 arguing that “NRS 108.234 . . . would have
afforded Iliescu no protection from Steppan’s lien.”

            Assuming (solely for the sake of
argument, and without waiving the Iliescus’ contrary arguments set forth below
or elsewhere [see footnote 1]) that
the arguments which Hale Lane makes on this point in its Renewed Motion are
accurate, then that necessarily means that Hale Lane committed malpractice when
it relied on and set forth the mirror image of those very same arguments, in
its Application for Release of Mechanic’s Lien, which it filed on behalf of the
Iliescus, on February 14, 2007, arguing that Steppan should have provided a
31-day pre-lien notice which would have allowed a timely notice of
non-responsibility to be filed to protect the Iliescus.  If these Hale Lane arguments, made in the
February 14, 2007 Application filed herein by Hale Lane on the Iliescus’ behalf
were as bogus as Hale Lane now contends, then why did Hale Lane make those arguments?
If these were bogus legal arguments, as Hale Lane now argues, then Hale Lane’s
Application was yet another instance of malpractice by Hale Lane.  Hale Lane did not have to make those
arguments so early and as quickly as it did, rather than allowing discovery to
be taken at a reasonable pace, on all of the facts which might demonstrate
other stronger defenses to the Steppan lien (including facts already then in
Hale Lane’s possession), including for example the arguments which will be
clarified and reiterated in the Iliescus’ upcoming Motion to Alter or Amend to
be filed hereafter, once this Court issues its Judgment.

            Accordingly, Hale Lane’s malpractice
committed in its representation of Mr. Steppan may be established on the basis
of several distinct negligent and inadequate acts by Hale Lane in its
representation.  These include, without
limitation:

            (i)         failure
by Karen Dennison to properly prepare the Addendum No. 3, in a manner which
protected the Iliescus from mechanic’s lien claims, by, for example, (a)
including language in Paragraph 1 of the Addendum (which paragraph dealt with
escrow extensions) conditioning escrow extensions on unconditional progress
payment lien releases being obtained from any party who had performed any work
with respect to the property through the date of the extension, or (b)
requiring the buyer to immediately inform the Iliescus prior to executing any
agreements or allowing any work to be performed which might lead to a
mechanic’s lien claim being asserted for offsite work, or (c)  requiring that the Iliescus be allowed to
review all contracts to be executed between the buyer and any such
third-parties performing any such work to verify that the terms of such
contracts were fair and adequate before they could be signed, or (d) ensuring,
as part of the Addendum No. 3, that a construction control, surety bond, or
other procedures were in place to protect the Iliescus from a possible lien
claim for work performed before financing was obtained; and

            (ii)        failure
to take advantage of the possibilities created by the buyer’s request for
Addendum No. 4 (which allowed the buyer an extension to close escrow) by
preparing that Addendum in such a manner as to ensure that as a condition to
the escrow extension granted therein, any lien claims which had accrued prior
thereto had been released and paid off prior to the escrow being extended;

            (iii)       providing
self-contradictory and therefore necessarily inaccurate advice in the first
conflict waiver letter;

            (iv)       assisting
the buyer in negotiating contracts with an architect which were directly
contrary to the best interests of the Iliescus, including an AIA contract for a
flat fee rate on the basis of a percentage of the anticipated costs for the
entire project, which flat fee contract was subsequently utilized and accepted
by this Court to cause the lien to be astronomically high for a project on
which not a single shovel of dirt was turned, such that the Hale Lane firm
should have insisted, in order to protect its client the Iliescus (as well as
its buyer client) that said AIA contract would not supersede any hourly
contracts pursuant to which any earlier work was already performed and
invoiced, and would not become effective, pursuant to the terms thereof, until
and unless certain conditions precedent had been met, such as financing being
obtained (the industry standard) or the sale closing;

            (v)        allowing
itself to represent buyer at the same time it represented seller and thus
allowing itself to learn information which was later argued to be imputed to
the Iliescus;

            (vi)       preparing
an ineffective indemnity agreement to supposedly protect the Iliescus;

            (vii)      failing to advise the Iliescus to get their own counsel to
advise them of their potential rights once the lien was asserted;

            (viii)     promising, in the second conflict waiver
letter, that Hale Lane would resolve the architect’s lien and resolve the
dispute with the architect, but then failing to adequately attempt to perform
this promise or complete this promised task; and

            (ix)       filing an inadequate Application to expunge
the lien in this litigation, only five pages in length, which failed to attack
the excessive amount of the lien in comparison to the improved value of the
property on which it was based (zero, as no work was done on site), or other
issues then known to Hale Lane.

II.    LEGAL ANALYSIS

A.        Hale Lane’s Motion for Summary
Judgment Is Premature
.

            Hale Lane’s Renewed
Motion for Summary Judgment relies, to a great extent, upon this Court’s
“Findings of Fact and Conclusions of Law, reached after the recent bench trial”
(Renewed Motion at p. 3, l. 15) which Hale Lane claims “add even further
support for Hale Lane’s motion for summary judgment.”  However, this Court’s Findings of Fact and
Conclusions of Law (hereinafter its “Decision”) has not yet resulted in this
Court issuing a judgment.  Hale Lane had
previously executed a stipulation staying the proceedings “until such time as a
final judgment is entered in the primary case between Steppan and Iliescu.”  (Hale Lane’s Renewed Motion at p. 2, ll.
8-10, and Exhibit 1.)  Thus, even though
the stipulation allowed Hale Lane to file a new dispositive motion while the
stay remained in effect (presumably on any new grounds which might have arisen
in the interim, not by simply reasserting its prior arguments), the stay does
in fact still remain in effect today, and the motion, which essentially treats
the Court’s Decision as equivalent to a final judgment, is premature under the
terms thereof, where no final judgment has actually yet been entered.

            This Court has heretofore
filed an order allowing the Iliescu Defendants to file a Motion to Alter or
Amend the Court’s Decision and Judgment which may exceed the 30 page limit and
be as long as 45 pages.  Thus, it is
known to the Court and to Hale Lane that upon the filing of a judgment,
rendering the time for the filing of a motion to alter or amend ripe, the
Iliescu Defendants intend to file a lengthy motion, asking this Court to alter
or amend its Decision.  Until that motion
has been heard and ruled upon, Hale Lane’s Renewed Motion for Summary Judgment
(which relies upon this Court’s Decision as though the same were equivalent to
a final judgment) is premature.  In
addition, even if the anticipated motion to alter or amend is denied, the
Iliescu Defendants also still intend to file an appeal.  Until that appeal has run its course,
entering judgment in Hale Lane’s favor, based in large part on the rulings
issued to date by the Court, does not make sense.  In Semenza
v. Nevada Medical Liability Ins.
, 104 Nev. 666, 765 P.2d 184, 186 (1988),
the Court ruled that “a legal malpractice action does not accrue until the
Plaintiff’s damages are certain and not contingent on the outcome of an
appeal.”  Based thereon, the Court
further ruled that legal malpractice claims prior to any such appeal should be
“held in abeyance” or “dismissed without prejudice” rather than tried, pending
the appeal.  Id.  If it was error in Semenza to try and adjudicate the
malpractice case early, it would be equally inappropriate, herein, to
adjudicate the Iliescus’ malpractice case early and prematurely, whether by
trial or by motion.  Thus, if any
dismissal is to be granted herein, it must be without prejudice.

B.        Hale Lane’s Central Argument, That
the Elements of Causation and Damage are Lacking As a Matter of Law, Must Be
Rejected.

 

            The elements of a
malpractice claim are set forth on page 9 of Hale Lane’s Renewed Motion.  They include the existence of an
attorney-client relationship creating a duty of care, which Hale Lane does not
contest; a breach of that duty, which Hale Lane does not contest; that this
breach proximately caused damages to the client, which Hale Lane contests; and,
finally, the existence of actual loss or damage, resulting from the negligence,
which Hale Lane contests, at least with respect to whether this loss resulted
from Hale Lane’s malpractice. 

            Hale Lane’s argument
that no damages resulted to the Iliescus as a result of Hale Lane’s malpractice
is, however, based on a straw man.  Hale
Lane’s Renewed Motion asserts at p. 10 that “Iliescu’s claims against Hale Lane
are rooted in the misguided notion that Hale Lane could have protected the
Iliescus from Steppan’s lien by advising the Iliescus to record a notice of
non-responsibility pursuant to NRS 108.234.” 
Hale Lane contends that this assertion is incorrect because the Iliescus
could not have been protected by the filing of a notice of non-responsibility,
in any event.

            Hale Lane’s arguments on
this point fail for three reasons.  (1) First,
Hale Lane’s analysis is simply false:  a timely
notice of non-responsibility would in fact have protected the Iliescus.  (2) Second, failure to file a notice
of non-responsibility was, in fact, repeatedly and successfully raised against
the Iliescus during the Steppan lien foreclosure litigation, to the detriment
of the Iliescus, and relied upon in this Court’s Decision, and the law of this
case, and claim preclusion, therefore prevent this argument from being asserted
by Hale Lane.  (3) Third, even if
Hale Lane were correct in its analysis, advising the Iliescus to file a notice
of non-responsibility was not the only method by which Hale Lane could and
should have protected the Iliescus.

            (1)        With respect to the first point, Hale
Lane’s argument that Dr. Iliescu is not a disinterested owner who could have
been protected from the architect’s lien by virtue of recording a notice of
non-responsibility must fail
.  This
argument is premised on the claim that only a disinterested owner may obtain
the protections of a notice of non-responsibility, and that Dr. Iliescu was not
a disinterested owner because he did not fit the definition thereof set forth
in NRS 108.234(7), which indicates that a disinterested owner is someone who
“does not personally or through an agent or representative, directly or indirectly,
contract for or cause a work of improvement . . . to be constructed, altered or
repaired upon the property . . . .” 
However, any claim that Dr. Iliescu failed this test is simply false.  Dr. Iliescu did not personally or otherwise
contract for the Steppan/FFA architectural work.  Indeed, this issue has already been resolved
in this Court’s Decision (otherwise relied upon by Hale Lane), which determined
as follows:  “Steppan entered into an AIA
Document B141 Agreement (“the contract”) with BSC to design and build the
towers....  The contract was signed by
Steppan and BSC.  Iliescu is not a party to the contract.”  Decision at Finding 10.  This finding of this Court, that Iliescu was
not a party to the BSC contract with Steppan, is accurate.  Indeed, Iliescu had no knowledge of BSC’s
involvement at that time.  Thus, because this Court has already ruled that the
Iliescus was not a party to the Contract
, it is simply inaccurate as a
matter of claim preclusion and the law of this case for Hale Lane to now erroneously
insist that Dr. Iliescu should be treated as though he was a party to the Contract who did
“personally or through an agent or representative, directly or indirectly,
contract for” the work comprising Steppan’s lien, such that he is not a
disinterested owner who would have been protected by filing a notice of
non-responsibility.

            Hale Lane’s argument is
not only wrong on the facts, but on the law as well.  It is based upon a reading of the
“disinterested owner” definition in Nevada’s mechanic’s lien statutes which is
extraordinarily broad, as Hale Lane contends that a “general rule” exists that
when a contract for the purchase or lease of real property expressly requires
improvements by the vendee/lessee, the land owner’s interest is automatically subject
to the lien.  See, Renewed Motion at p. 11, ll. 5-8.  This argument is simply a misstatement of
Nevada lien law, which explains why all of the recent authority provided for
this claim by Hale Lane comes from other states, such as Kentucky, Florida and
California, even though mechanic’s lien laws are a creature of state statute
and are governed by the subject state’s statutory language.  The only Nevada case cited by Hale Lane in
support of this argument was decided in 1916, long before the current Nevada
mechanic’s lien statutes came to exist.

            Hale Lane’s argument, if
accepted, would render the provisions of NRS 108.234 completely meaningless and
absurd and would leave no explanation for why NRS 108.234 even exists.  NRS 108.234 clearly contemplates that a
property owner who knows that work is
being done on his property
, pursuant, for example, to the terms of a lease
or an option, may, contrary to the Hale Lane argument, nevertheless escape responsibility for a lien based on the same if the property owner meets the
statutory requirements involved in recording an effective notice of
non-responsibility.  For example,
although the statute’s provisions are not limited to owners who enter into a
lease or an option for the lease or sale of their property, the statute gives
specific examples of the time period within which lessors and optionors must
file their notice of non-responsibility in order to protect their property from
lien claims.  NRS 108.234(2).  If
Hale Lane’s assertion,
that a party
who enters into a lease or purchase agreement knowing that construction is
contemplated as a part thereof could not possibly protect the property from a
mechanic’s lien under any circumstances
, even by recording a notice of
non-responsibility
, were accurate,
then why would the statute specifically indicate how to do so?  The interpretation claimed by Hale Lane would
render the entire statutory notice of non-responsibility scheme a meaningless
absurdity.

            The fact of the matter is that
landlords who enter into leases with tenants, which involve a tenant
improvement aspect, and sellers of real property under similar scenarios,
record effective notices of non-responsibility in Nevada every day, which notices of non-responsibility, if properly
recorded in accordance with the statute, are upheld in Nevada courts every day.  How does this happen if, as Hale Lane now
claims, only a truly “disinterested owner” may benefit from filing a notice of
non-responsibility, and only a party to a sale or lease who does not realize
that work is going to be done pursuant thereto can truly be a disinterested
owner?  Because Hale Lane is wrong.  NRS 108.234(7) defines a disinterested owner
as one who does not contract for or cause a work of improvement to be
developed.  Knowing that such a work of
improvement is going to be developed because the lease or sales contract
requires it is not enough to be excluded from the definition.  One has to be a party to the subject contract
for construction or other services. 
Iliescu was not, as already found by this Court, a party to the subject
architectural contract.

            (2)        Secondly,
moreover, in addition to simply being false, Hale Lane’s argument has, in any
event,  already been rejected by this
Court
.  At paragraphs 14-16 of its
Decision, this Court addresses and rules upon the question of whether the
Iliescus had sufficient notice of Steppan’s mechanic’s lien rights to have been
on notice thereof, notwithstanding the failure of that architect to provide any
31-day pre-lien right to lien notice. 
Why this discussion was even relevant to the Court’s Decision is then
set forth and explained at the last sentence of paragraph 17 of this Court’s
Decision, referencing “the notice of non-responsibility process.”  The reason this Court’s determination as to
whether the Iliescus had actual notice of the work being performed by the
architect even matters, therefore, is that the Iliescus did not act on that
claimed knowledge by filing a notice of non-responsibility. 

            Indeed, in the June 22, 2009, Order
entered against the Iliescus by Judge Brent Adams (Exh. “7”), which was relied upon by the Court during the lien
foreclosure trial, the Court ruled that the Iliescus had actual notice of the
lienable work being performed by an architectural firm related to the
site.  This Order ruled in favor of the
architect, whose prevailing motion had argued that “applicants’ [the Iliescus’]
counsel [Hale Lane] reviewed the contract on the project and therefore had
knowledge of the architect’s identity” which knowledge, Steppan’s successful
motion argued, should be “imputed” to the Iliescus.  Exh.
“7”
at p.6, ll.6-9.  The Iliescus
were reduced to therefore arguing that there was a question as to whether the
Iliescus’ prior counsel, Hale Lane, had the architect’s “information in mind when
it was acting on [the Iliescus’] behalf.” 
Id. at ll. 14-16.  Thus, Brent Adams’ own Order demonstrates the
harm which was done to the Iliescus as a result of Hale Lane’s knowledge, which
was imputed to the Iliescus, even though Hale Lane had failed to share that
knowledge with them.

            Notwithstanding these
facts, Hale Lane now contends that its knowledge, which it failed to share with
its clients, the Iliescus, but which was successfully argued to be directly
imputable against the Iliescus anyway, should now be treated as completely
meaningless, even though it was a central question argued by the parties in a
central summary judgment dispute which resulted in an order against the
Iliescus and in favor of Steppan.

            Accordingly (without
waiving other alternate arguments which the Iliescus have and intend to
continue raising with respect to any error in this Court’s prior orders on this
subject), the arguments now raised by Hale Lane must be rejected, given that
Hale Lane’s failure to advise the Iliescus of knowledge which had come into
Hale Lane’s possession, which was later argued to be imputed to the Iliescus,
clearly harmed the Iliescus and resulted in damages in the form of this Court’s
Decision as well as damages incurred by the Iliescus having to defend against
the Steppan lien.  The claim that the
Iliescus would not have benefitted from the advice to record a notice of
non-responsibility is simply false.

            (3)        Finally, the failure to advise the
Iliescus that they should record a notice of non-responsibility was not the only act of malpractice
committed by Hale Lane, as filing a notice of non-responsibility was not the
only advice which Hale Lane could have offered had Hale Lane done its job and
warned the Iliescus of the possibility of such a lien and assisted the Iliescus
to avoid the same
.  Even if Hale
Lane’s claim were correct, that a notice of non-responsibility would have been
unavailing to assist the Iliescus in avoiding an architectural lien, this is
not the only advice that Hale Lane could have provided in order to assist the
Iliescus to avoid that lien, including on the basis of Hale Lane’s knowledge of
that potential. 

            Hale Lane could also
have advised the Iliescus (either when the Addendum No. 3 was being negotiated
or thereafter or in conjunction with Addendum No. 4) that they should make
escrow closing extensions conditional on obtaining evidence from the Architect
that it had been paid in full for all work completed to date and was waiving
and releasing all liens for that work, including via an unconditional progress
payment lien release, under NRS 108.2457(5)(b).   Hale Lane could have advised Dr. Iliescu
that he should be brought into the loop with respect to any contracts which had
been executed for any lienable work which might be performed with respect to
the project prior to closing, which might have protected Dr. Iliescu from
claims that payments made under hourly fee contracts could later be
retroactively changed if a subsequent AIA Agreement was entered into with an
alleged retroactive effective date.  Or
Hale Lane could have simply advised the Iliescus what Hale Lane already knew
about this fact, which would have allowed the Iliescus to utilize the leverage
which buyer requests for closing extensions gave them, to demand revisions to
any such onerous payment terms as a condition to the escrow extension.  Hale Lane could have insisted on a surety
bond being posted to be utilized to bond around any future lien, as a condition
to any extension. 

            Hale Lane’s involvement
with the buyer, and with the buyer’s contracts with the architect, should have
allowed Hale Lane to understand the dangers to its Iliescu clients which were
being created thereby.  Any number of
approaches could have been taken, via the right terms and conditions in Addendum
No. 3 or in Addendum No. 4, to protect against these dangers.  In short, given Hale Lane’s knowledge of the
inherent risks of the transaction, which knowledge only increased as Hale
Lane’s involvement on both sides of the transaction caused it to acquire more
and more information in regard to the same, Hale Lane had a duty to disclose
these risks to its clients the Iliescus, and to offer advice and counsel
regarding various concurrent or alternative measures to avoid the same.  Instead, Hale Lane chose to keep the Iliescus
in the dark, like dumb, fat, and happy sheep being prepared for the slaughter,
and now Hale Lane proffers the laughable defense that there was nothing which
it could have done to prevent this outcome, and thus it had no duty to lift a
finger to assist its clients.

            Thus, the argument that
Hale Lane’s failure to advise the Iliescus to record a notice of
non-responsibility “cannot, as a matter of law,” be the cause of any injury to
the Iliescus, because the “property was burdened with the lien by operation of
law” as though nothing else could at any time have been done about this, must
be rejected.  Hale Lane was the Iliescus’
counsel at the time that events were occurring which subjected the Iliescus’
property to an outrageously high  potential
lien risk.  This risk was or should have
been recognized by Hale Lane, both during and after the preparation of Addendum
No. 3 (and perhaps before), and both before and after Hale Lane obtained
additional information with respect to this issue as a result of its concurrent
and conflicting representation of both the buyer and the seller.  Hale Lane failed to warn its clients against
this risk, or to counsel the Iliescus to take any of a number of different available
steps to mitigate against it, which malpractice proximately resulted in
substantial losses to the Iliescus.

C.        Hale Lane’s Motion for Summary
Judgment Must Also Be Denied Given the Many Questions of Fact which Exist in
this Case
.

 

            The Renewed Motion for
Summary Judgment may not be granted as numerous genuine issues of material fact
remain to be analyzed and resolved before summary judgment can issue.  Some of these questions of fact will be
resolved only once all final post-trial motions and appeals have run their
course in the underlying litigation.  See, e.g.,
Semenza, as quoted above.  This principle is why the parties previously
stayed the malpractice case by two stipulations.  Other genuine questions of material fact will
be able to be resolved only after discovery has been completed.  These include, without limitation, the
following:

-           why Hale Lane agreed to
review the AIA contract between Steppan and FFA on the one hand, and the buyer
on the other hand (Exh. 2 hereof), apparently at the same time that another
attorney at Hale Lane, Karen Dennison, was providing representation to the
seller (Iliescu) whose interests have now been harmed by this Court’s very
adoption of that AIA agreement;

-           when did Hale Lane first
begin working the other side of the transaction, and how long thereafter did
Hale Lane finally seek a conflict waiver;

-           whether this Court’s
Decision, which is relied upon extensively in Hale Lane’s Renewed Motion, will
remain in place and unaltered following this Court’s ruling on an anticipated
motion to alter or amend the same, and whether this Court will amend its
Decision in a manner which mitigates the harm to the Iliescus from the AIA
agreement which Hale Lane worked on without protecting its clients, the
Iliescus, interests with respect thereto;

-           why a conflict check was
not run at Hale Lane to prevent Hale Lane from inadvertently working on the AIA
agreement on behalf of the buyer, at the same time that Hale Lane represented
the Iliescus, who would later have the terms of that AIA agreement utilized
against them and the firm’s knowledge imputed against the Iliescus;

-           why, given that Hale
Lane worked on the AIA agreement, that agreement did not include terms in favor
of the Iliescus (one of Hale Lane’s clients at the time Hale Lane was working
on the AIA contract), to protect the Iliescus;

-           why Karen Dennison
failed to include adequate language in Addendum No. 3 to protect the Iliescus
from liens which might arise from off-site architectural and design work which
would be performed as part of obtaining entitlement approvals, given that
Addendum No. 3 referenced such entitlement approvals and also referenced the
conditions of future escrow extensions, which would have been the perfect
location to insert language regarding such extensions being conditioned upon
unconditional lien releases for any work completed to date;

-           whether any attorney at
Hale Lane came to understand that a non-licensed foreign architectural firm was
providing primary architectural services for the project in Nevada and whether
any attorneys at Hale Lane made these facts and their implications known to
Hale Lane’s clients, Dr. and Mrs. Iliescu, and if not, why they did not do so,
given the numerous violations of NRS Chapter 623 which were being committed by
FFA and Steppan in regard to these matters;

-           why Addendum No. 3 did
not require that financing was a condition precedent to any flat fee agreement
becoming effective as between the architect and the buyer so as to protect the
sellers’ (Hale Lane clients Dr. and Mrs. Iliescu’s) interests;

-           why Addendum No. 3 did
not contain any language mandating that a construction control account be in
place to ensure payments were regularly being made to any designer or
architects performing work at the project, off-site, and prior to financing
being obtained, and mandating that the Iliescus be included in all
communications with this construction control company so as to allow the
Iliescus to ensure that their property was not being subjected to potential
lien claims;

-           why Addendum No. 3 did
not require the prior approval of the Iliescus with respect to any agreements
entered into with any architect or designer providing off-site services for the
project, which might subject the property to potential liens, in order to allow
the Iliescus to protect themselves from such lien claims by being allowed to
review such contracts and veto any provisions contained therein which harmed
their interests;

-           why the Iliescus were
not informed that the purchase agreement had been assigned to new buyers
without the means to close, and what information was learned by the Hale Lane
firm as a result of its involvement with the architectural and design contracts
by and between the buyer and the architect, and during its involvement with the
development process, which created a duty on the part of Hale Lane to protect
its Iliescu clients, to preserve its Iliescu clients’ rights, or to advise and
inform its Iliescu clients of the substantial dangers and risks currently being
faced by them, and why such information as was known or learned by Hale Lane in
that regard was not shared with the Iliescus;

-           whether Karen Dennison
was making a false statement in the first conflict waiver letter when she
indicated, in the first sentence of the second page of that letter, that Hale
Lane would continue to represent the Iliescus should any conflict arise between
the buyer and the Iliescus “involving the property” or whether she was making a
false statement when she indicated, in the next sentence that such
representation of the Iliescus as to any such matters could only occur if such
matters were “not involving the
property;”

-           why Hale Lane’s conflict
waiver letters did not include any indication to the Iliescus that they needed
to retain separate counsel to review the conflict waiver letter before
executing the same, and whether, without such advice, the Iliescus’ execution
of that letter was truly made on the basis of informed consent, as required by
Nevada Rule of Professional Conduct 1.7(b)(4);

-           whether the first
conflict waiver letter on which the Hale Lane Renewed Motion for Summary
Judgment relies as an allegedly dispositive defense to the claims against Hale
Lane was sufficient to provide the Iliescus with informed consent before
executing the letter, which is material given that, in Nevada, “an attorney who
represents conflicting interests without the informed consent of all affected
clients violates a rule of professional conduct applicable to lawyers who
practice in Nevada,” and a “violation of a rule of professional conduct”
although it does not establish an act of legal malpractice, is nevertheless
“evidence” which may be considered in determining whether or not legal
malpractice has occurred.  See, Mainor
v. Knault
, 120 Nev. 750, 769, 101 P.3d 308, 321 (2004);

-           what were all
of the activities conducted by Hale Lane on behalf of either the buyer or on
behalf of the Iliescus during any and all months from before the time that the
Iliescus retained Hale Lane to assist in negotiating Addendum No. 3 with the
buyer until the date on which the Hale Lane firm ceased providing
representation to the Iliescus in this litigation, during which lengthy time
period any number of items of information may have been made known to the Hale
Lane firm which it would have been required to advise the Iliescus of in order
for the Hale Lane firm to meet their obligations to the Iliescus;

-           to what extent, if any, did the Hale
Lane firm know or should have known, that the approvals for the Wingfield
Towers project obtained from the city council were conditioned upon so many
conditions of such severity that the approvals were not adequate or sufficient
to ensure financing would be obtained for the project, and what duties arose on
behalf of Hale Lane to its client, the Iliescus, as a result of any such
knowledge.  (All 36 conditions to the
entitlements may be reviewed at Exhibit 10 to the Hale Lane Renewed Motion.);

-           whether Hale Lane’s claim that the
entitlements obtained were “appurtenant to the land and substantially increased
the marketability of Iliescu’s property” which argument was in fact used
against the Iliescus’ interests at the trial of this matter, is true, which
issue requires further discovery given that the entitlements were not,
apparently, sufficient to allow financing to be obtained, and, given that the
entitlements were subject to a long list of onerous conditions many of which
would have been extraordinarily expensive to meet, and given that the
entitlements were not perpetual in nature and have subsequently expired such
that they did not in fact substantially increase the marketability or value of
Iliescu’s property as claimed by Hale Lane;

-           why, in assisting the Iliescus to
negotiate Addendum No. 4 to the purchase agreement for the subject property,
which benefitted the buyer, by extending the escrow termination date for the
buyer to close, Hale Lane did not protect the Iliescus by including provisions
within that Addendum No. 4 conditioning this extension on any number of
conditions which (as outlined above) might have protected the Iliescus from the
Steppan lien claim, or why did Hale Lane not advise the Iliescus of the risks
of allowing this extension;

-           why did Hale Lane tell the Iliescus
to execute Addendum No. 4, which was against their interests, without ensuring
adequate protections were included therein;

-           to what extent was Hale Lane
responsible for allowing the buyer to enter into an AIA architectural agreement
with Steppan which provided for exorbitant fees to be paid to the architect on
the basis of a flat fee tied to completion costs, even if no actual work ever
commenced on-site and no such costs were ever incurred, which was contrary to
Hale Lane’s clients’ (including both the buyer and the Iliescus’) best
interests, even though the work performed under the hourly contract established
a price far lower than the AIA agreement was later held to retroactively
require;

-           whether the second conflict waiver,
upon which the Hale Lane Motion also relies, was adequate to provide the
Iliescus with informed consent, which is necessary in Nevada and, as this
letter indicated that Hale Lane would act on the Iliescus’ behalf to resolve
the dispute with the architect which never happened, what steps did Hale Lane
ever take to attempt to resolve the mechanic’s lien as it promised to do in
this letter, and were those steps adequate or deficient;

-           why, if the lien was to be discharged
at no expense to the Iliescus as now claimed by Hale Lane’s Renewed Motion at
pg. 6, line 26 through pg. 7, line 2, the Iliescus have not, in fact, yet
obtained a discharge of the lien, nor avoided the costs and fees from their
attempts to discharge the lien; and

-           why was Hale Lane’s February 14, 2007
Application, filed on the Iliescus’ behalf for the release of Steppan’s lien,
so inadequate, so brief, and so half-hearted an effort, and whether this was
because Hale Lane was now only acting to protect itself, rather than working
for a new client that it could bill, in light of the many arguments which could
have been raised and were not, therein, especially given that Hale Lane has
now, itself, in its Renewed Motion, challenged the adequacy of the core
argument which Hale Lane presented therein.

D.        Fees Issues.

            The Hale Lane argument that fees
incurred by the Iliescus in attempting to remove the lien may not be sought as
damages, because no rule, statute, or contract authorizing an award of
attorneys’ fees exists, must also be rejected. 
It is generally true, as argued at p. 13, ll. 18-23 of Hale Lane’s
Renewed Motion,  that a rule, statute or
contract is required in order to award fees incurred in the successful
prosecution of a suit, when the fees arise out of that same suit.  Based thereon, it may very well prove true
that the Iliescus will be unable to obtain their fees for their prosecution of
the malpractice claims against Hale Lane, once those claims have been
successfully prosecuted.[2] 

            However, this legal rule applies
only to fees incurred in this malpractice suit. 
Nevada law also recognizes that attorneys’ fees incurred in order to
defend against a third-party’s claim, including a mechanic’s lien claim, may be
pursued as special damages in suits against those whose failures or breaches
led to this claim.  For example, in Liu v. Christopher Homes, LLC, 321 P.3d
875, 130 Nev. Adv. Op. 17 (2014), the Nevada Supreme Court allowed a plaintiff
whose property had been clouded by a mechanic’s lien claim, to recover the
attorneys’ fees she had incurred in defending against that mechanic’s lien
claim, and the lien foreclosure suit thereon, as part of her damages in her own
cross-claim against the developer, for breach of the warranty of good
title.  Significantly, this was allowed
even though she had settled with the lien claimant, rather than ever obtaining
an Order dismissing the lien on the merits. 
Clearly, therefore, in precisely like fashion in this case, if the
Iliescus demonstrate that the losses they are suffering from the lien arose out
of Hale Lane’s malpractice, then Hale Lane is liable for the fees the Iliescus
have incurred in defending against that lien. 
The fees which the Iliescus have incurred to date, and will continue to
incur, until their defense of the Steppan lien claim is finally vindicated,
resolved, or fully adjudicated after appeal, will therefore be recoverable
against Hale Lane as special damages.  The attorneys’ fees incurred by the Iliescus
in that process are awardable against Hale Lane, and will be pled and proven as
such, when the time arrives to do so.

            We do not now know, however, the
total attorneys’ fees which will be expended to arrive at that point.  The Hale Lane Renewed Motion is therefore
premature.

E.        Contrary
to the Argument Set Forth at Pages 13 and 14 of the Hale Lane Renewed Motion
the two Conflict Waiver Letters Do Not Establish a Defense on Which Summary
Judgment May Issue
.

 

            The Iliescus clearly suffered harm
as a result of Hale Lane going forward with a representation of the buyer at
the same time it was representing the Iliescus as the seller, which damage
includes, without limitation, that Hale Lane learned, through its representation
of the buyer, certain knowledge, which was then argued as imputable to the
them, even though it was not shared with them. 
See, Exh. “7,” at p. 2, ll. 6-9 and 27-28.  Furthermore, the Hale Lane firm also
committed other acts of malpractice, as described above, both before and
after the conflict letters were signed and nothing stated in the
conflict waiver letters can be raised as a defense against these independent
acts of malpractice.  Indeed, nothing
stated in the conflict waiver letters indicate that the Iliescus are waiving any malpractice claims which might arise
in conjunction with Hale Lane’s representation of the Iliescus, whether that
malpractice arose as a result of the concurrent representation of the buyer, or
independently (and both types of malpractice exist here).  Instead, the letter merely indicated that if
the buyer consented to the representation and waived any and all “conflicts of
interest” that the letter should be signed, without indicating that any waiver
was being given as to any malpractice claims, including any such claims arising
out of the conflicts. 

            Thus, the only malpractice claim
which the letters might be construed to have waived would be a claim that it
was an act of malpractice merely to represent both parties at the same
time.  However, any claim that the
conflict letters were “valid” and effective to waive even that limited
malpractice claim, would clearly be false. 
First and foremost, such a malpractice waiver would be void under Nevada
Rule of Professional Conduct 1.8(h)(1) as no separate lawyer was representing
the Iliescus, as mandated by that rule, for them to enter into a malpractice
waiver.  (“A lawyer shall not: Make an
agreement prospectively limiting the lawyer’s liability to a client for
malpractice unless the client is independently represented.”)  Moreover, the first letter did not provide
sufficient information to Dr. and Mrs. Iliescu to provide for informed consent,
which consent is required under Nevada Rule of Professional Conduct 1.7(b)(4),
as part of the waiver of a concurrent conflict of interest.  The letter did not, for example, provide any
of the information contemplated by the ABA in its comment to Model Rules of
Professional Conduct (upon which Nevada’s Rules of Professional Conduct are based)
Model Rule 1.0(E), in which comment “informed consent” is discussed, and which
comment requires that, in order to provide a client with informed consent, the
client should receive a communication which ensures “that the client . . .
possesses information reasonably adequate to make an informed decision.
Ordinarily, this will require communication that includes a disclosure of the
facts and circumstances giving rise to the situation, any explanation
reasonably necessary to inform the client or other person of the material
advantages and disadvantages of the proposed course of conduct and a discussion
of the client’s opinions or alternatives.” 
The comment also discusses advising a client to seek separate counsel,
which, more importantly, as discussed above, is mandatory if these letters were
intended (as now argued by Hale Lane) to be malpractice waivers.

            The initial conflict letter was only
four paragraphs long.  It did not explain
the advantages or disadvantages of allowing Hale Lane to represent the seller
at the same time that the buyer was being represented.  It did not advise the Iliescus of other
options and alternatives, to allowing Hale Lane’s conflicting
representation.  It did not advise Dr.
and Mrs. Iliescu that they should seek the advice of independent counsel before
signing the consent being requested.  The
letter also did not explain the unique nature of the conflict being asked to be
waived, which was a concurrent and presently existing conflict between the
seller and the buyer of real property, under a contract which had not yet
closed such that the buyer and the seller had currently existing inherently
contrary interests. 

            The letter also contained two
sentences which were directly contrary to one another, such that one of the two
sentences was, as a matter of logic, inaccurate, with respect to whether the
Iliescus could continue to be represented by the Hale Lane firm in the event of
any dispute between the seller and the buyer “involving the property”:

It is understood and
agreed that in the event a conflict between Iliescu and buyer shall arise in
matters involving the property, this
law firm will continue to represent Iliescu in such manner.  It is also understood and agreed by buyer
that our representation of buyer on this one matter will not preclude our
representation of Iliescu in matters not
involving the property
in the event the buyer, or any of them is an
adversary to Iliescu on such other matters. [Emphasis added.]

 

            The second letter was provided to
the Iliescus only after the Hale Lane firm’s malpractice had been revealed to
Hale Lane, by virtue of a lien having been asserted against the property which
lien might have been avoided had Hale Lane provided sufficiently adequate
counsel and protections to the Iliescus while representing them.  Thus, this second letter (Exhibit 13 to the
Hale Lane Renewed Motion) should have been especially clear in addressing all of the facts.  It should have revealed that not only was
there now a conflict between the parties being asked to execute this letter but
that a conflict also now existed by and between the Iliescus and the Hale Lane
firm, given the malpractice claim that the Iliescus now had against the Hale
Lane firm.  However, the second letter
failed to address any of these items, and also failed to address the other
items referenced in the ABA commentary on informed consent. 

            The letter further claimed that the
firm had been asked to represent both the Iliescus and the buyers due to a
“unity of interest” those two entities had in “resolving the dispute with the
architect for the property involving the AIA architectural services contract,
and the mechanic’s lien recorded by the architect and related issues.”  However, the so-called unity of interest
between the buyer and the Iliescus was illusory.  The buyers were only subject to a contract
claim to be brought against them by the architect, which the buyers could avoid
by the simple expedient of filing a bankruptcy, if they even had any assets to
defend.  The Iliescus, on the other hand,
were potentially subject to a mechanic’s lien claim against their real
property, which, by definition, would be a secured claim and could and would,
potentially, still be able to be pursued notwithstanding any bankruptcy which
might be filed by the Iliescus.  This
difference between the two Hale Lane clients was real and substantial:  Steppan’s lawsuit didn’t even bother to name
the buyer who contracted for architectural services as a Defendant, or to list
a breach of contract claim therein, but named solely the Iliescus on a lien
claim against their property. 

            Furthermore, the work which the Hale
Lane firm did after entering into this letter did not involve “resolving the
dispute with the architect” as the letter avers.  Rather, despite the promise that Hale Lane
would “represent both Iliescu and buyer jointly regarding the  resolution of the mechanic’s lien issue with
the architect” no such resolution was ever achieved, leading to questions of
material fact with respect to what steps Hale Lane even took to attempt to
perform this promise.  The indemnity
agreement which Hale Lane had obtained from the buyer in order to purportedly
protect the seller, had, moreover, already
been signed
, before this second conflict waiver letter was executed (the
letter referencing that indemnity agreement as a document which, “has been
executed by buyers” already at that time).

            Based on all of the foregoing, the
assertion that the two conflict waiver letters somehow protect Hale Lane from
the Iliescus’ malpractice claims are inaccurate.  As no separate counsel represented the
Iliescus before they signed these two letters, the letters can not be utilized
in defense of the Iliescus’ malpractice claims in any event as a matter of law
under Nevada Rule of Professional Conduct 1.8(h)(1) (“A lawyer shall not: Make
an agreement prospectively limiting the lawyer’s liability to a client for
malpractice unless the client is independently represented.”)

            If anything, the first and second
conflict waivers are not a defense to the malpractice claims, but are the basis
for yet additional malpractice claims against Hale Lane, for the bad advice set
forth therein and in conjunction therewith.

III.   POINTS AND AUTHORITIES AS
TO COUNTERMOTION FOR ADDITIONAL TIME FOR DISCOVERY

 

            Before this Court can properly rule
on a renewed motion for summary judgment, Third-Party Plaintiffs should be
permitted to complete discovery.  The
Iliescus therefore hereby more that this Court deny Plaintiff’s motion pursuant
to NRCP 56(f), which states:

Should it appear
from the affidavits of a party opposing the motion that he cannot for reasons
stated present by affidavit facts essential to justify his opposition, the
court  may refuse the application for
judgment or may order a continuance to permit affidavits to be obtained or
depositions to be taken or discovery to be had or may make such other order as
is just.

 

            In Harrison v. Falcon Products, 103 Nev. 558, 746 P.2d 642 (1987), the
Nevada Supreme Court ruled that granting a defendant’s motion for summary
judgment in the early stages of the proceedings was an abuse of discretion,
when the plaintiff had requested additional time to complete discovery.  See,
also, Ameritrade Inc. v. First Interstate Bank, 105 Nev. 105, 770 P.2d
1318 (1989).

            In the instant case, Third-Party
Plaintiffs’ malpractice claims are in the early stages of the proceedings –
discovery has not truly commenced in earnest on these claims, let alone been
completed.  Instead, these claims have
been stayed by stipulation and court order for years.  Consequently, Defendants’ counsel has not had
the opportunity to discover information or compile facts that are essential to
its opposition.  See, Affidavit of Dr. Iliescu, attached as Exhibit “8” hereto. 
Discovery and depositions of the attorneys at Hale Lane are necessary to
enable the Iliescu Defendants to develop certain critical factual issues that
may be case dispositive, or at the very least, rebut the Third-Party
Defendants’ claims as to the absence of genuine issues of material fact.  Therefore, summary judgment is premature such
that Hale Lane’s Renewed Motion for Summary Judgment should be denied, and more
time for discovery should be granted.

IV.  
POINTS AND AUTHORITIES IN SUPPORT OF COUNTERMOTION TO AMEND THIRD-PARTY
COMPLAINT

            The Iliescu Defendants have
countermoved for leave to file an Amended Third-Party Complaint, in order to
more clearly enunciate all of the acts of malpractice for which Hale Lane and
its attorneys are being sued.  A true and
correct copy of a proposed Amended Third Party Complaint is attached as Exhibit “9” hereto.  This proposed pleading also adds additional
names of potentially involved Defendants.

            Leave to Amend should be freely
granted when justice so requires.  NRCP
15(a) provides in pertinent part:

A party may
amend the party’s pleading once as a matter of course at any time before a
responsive pleading is served or, if the pleading is one to which no responsive
pleading is permitted and the action has not been placed upon the trial
calendar, the party may so amend it at any time within 20 days after it is
served. Otherwise a party may amend the party’s pleading only by leave of court
or by written consent of the adverse party; and leave shall be freely given when
justice so requires
. . . . (Emphasis Supplied).

 

In determining
whether leave to amend shall be granted pursuant to NRCP 15, the Nevada Supreme
Court has adhered to the doctrine set forth by the United States Supreme Court
in Foman v. Davis, 371 U.S. 178, 83
S.Ct. 227 (1962).  See, Adamson v. Bowker, 85 Nev. 115, 450 P.2d
796, 800 (1968). In Foman, the
Supreme Court reiterated the philosophy of Rule 15, that amendments of the
pleadings are to be freely granted, stating:

If the underlying facts or
circumstances relied on by Plaintiff may be the proper subject of relief, he
ought to be afforded an opportunity to test his claims on the merits.  In the absence of any apparent or declared
reasons such as undue delay, bad faith, or dilatory motive on the part of the
movant, repeated failure to cure deficiencies by amendments previously allowed,
undue prejudice to the opposing party by virtue of allowance of the amendment,
futility of amendment, etc., - - the leave should, as the rules require, be
‘freely given’. 

 

371 U.S. at 178,
83 S.Ct. at 230.

            Based on the discovery which has
been completed, the motions which have been heard, the trial which has been
completed, and the rulings which have issued since the date on which the
parties stipulated to stay the Third-Party Complaint, the Third-Party
Plaintiffs are now in a much better position to clarify and enunciate the
entire premises and bases for their Third-Party Claims.  Based thereon, in order to allow those claims
to be more fully and comprehensively articulated, this Court should grant this
Motion for Leave to Amend, and allow the amended pleading, substantially in the
proposed form attached as Exh. “9”
hereto, to now be filed.

V.   
CONCLUSION

            For the reasons set forth above,
Hale Lane’s Renewed Motion for Summary Judgment should be denied.  (At the very least, any dismissal of the
Third-Party claims against Hale Lane should be without prejudice.)  Instead, the Iliescus’ countermotions should
be granted.

            DATED
this _____day of September, 2014.

 

 

 

By_________________________________________

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



1Many of
the arguments set forth in this brief are necessarily made under the necessary
assumption, solely for the sake of argument, that this Court’s Decision and any
Judgment entered thereon will withstand post judgment motions to alter or
amend, and appeals, such that Hale Lane will not be given any relief or
mitigation as to the malpractice claims against it, as a result of any
successful arguments to revise or overturn this Court’s Decision.  As such, nothing stated in this Opposition
should be construed as an admission by the Iliescus of the veracity of any fact
found or legal conclusion reached to date by this Court.  The Iliescus intend to raise numerous
arguments in post-trial motions and on any necessary appeal thereafter, which
take issue with the final disposition of this case as it currently stands, and
nothing stated herein is intended as a waiver of the Iliescus’ arguments to be made
in post-judgment briefs and appellate briefs, including potentially alternative
or contradictory arguments to those set forth herein.  Rather, assuming solely arguendo that those
post-trial filings are unsuccessful, then the current disposition of this case
suggests the validity of the arguments in f avor of the third-party malpractice
claims set forth herein.

2It may
also be the case, however, that an offer of judgment will at some point be made
to Hale Lane which would then create a basis for fees under the applicable
rules and nothing stated herein waives that possibility, or the possibility
that other rules and statutes or contractual provisions may come to light to
allow for fees to be awarded to the Iliescus in the prosecution of that claim.

Indemnification in Title Disputes from Third Parties

 

ANS

G.
MARK ALBRIGHT, ESQ.

Nevada
Bar No. 001394

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 Defendant/Counterclaimant

 

 

DISTRICT COURT

CLARK COUNTY, NEVADA

 

 

DADSON
  WASHER SERVICE, INC.,

 

                                    Plaintiff,

 

            vs.

 

ASCENDING GROWTH
  PROPERTIES, LLC, a California limited liability company; and DOES 1 through
  100,

 

Defendants.

CASE NO.        A-14-698694-C

DEPT NO.        XXIX

 

 

 

 

ANSWER
  TO COMPLAINT; AND THIRD PARTY COMPLAINT

 

ASCENDING
  GROWTH PROPERTIES, LLC, a limited liability company, 

 

                                    Third
  Party Plaintiff,

 

            vs.

 

WENDY’S
  REAL ESTATE, LLC, a Nevada limited liability company; GNC PROPERTIES LLC, a
  Nevada limited liability company;

DOES
  1 through 10, inclusive, and ROE COMPANIES 1 through 10, inclusive,

 

                                    Third
  Party Defendants.

 

ANSWER TO COMPLAINT, AND THIRD PARTY
COMPLAINT

COMES
NOW Defendant, ASCENDING GROWTH PROPERTIES, LLC, a California limited liability
company (hereinafter referred to as “Defendant”), by and through its attorneys
of record, ALBRIGHT, STODDARD, WARNICK & ALBRIGHT, and hereby responds to
the Complaint of Plaintiff, DADSON WASHER SERVICE, INC., (hereinafter referred
to as “Plaintiff”) on file herein, by admitting, denying and alleging as
follows:

PRELIMINARY STATEMENTS

  1. In
    answering Paragraph I of Plaintiff’s Complaint, Defendant is without sufficient
    knowledge or information to form a belief as to the truth or falsity of the
    allegations contained therein, and therefore denies the same.
  2. In
    answering Paragraph II of Plaintiff’s Complaint, Defendant admits the
    allegations contained therein.
  3. In
    answering Paragraph III of Plaintiff’s Complaint, Defendant is without
    sufficient knowledge or information to form a belief as to the truth or falsity
    of the allegations contained therein, and therefore denies the same.
  4. In
    answering Paragraphs IV, V, VI, VII, VIII and IX of Plaintiff’s Complaint,
    Defendant denies the allegations contained therein.

FIRST CAUSE OF ACTION

(Breach of Contract Against All Defendants)

  1. In
    answering Paragraph X of Plaintiff’s Complaint, Defendant repeats and realleges
    each response above as though fully set forth herein.
  2. In
    answering Paragraphs XI, XII, XIII, XIV and XV of Plaintiff’s Complaint,
    Defendant denies the allegations contained therein.

AFFIRMATIVE DEFENSES

FIRST AFFIRMATIVE DEFENSE

Plaintiff’s
Complaint fails to state a claim against the Defendant upon which relief can be
granted.

SECOND AFFIRMATIVE DEFENSE

Plaintiff’s
claims are barred by estoppel.

THIRD AFFIRMATIVE DEFENSE

Plaintiff’s
claims are barred by failure or inadequacy of consideration.

FOURTH AFFIRMATIVE DEFENSE

Plaintiff’s claims are barred by the applicable statutes
of fraud, statutes of repose, by laches, and by any and all other time-bar
defenses or other similar defenses relating to the failure of the Plaintiff to
timely pursue its claims.

FIFTH AFFIRMATIVE DEFENSE

Plaintiff’s claims are barred by the Plaintiff’s own
tortious conduct and are offset by the damages due and owing to the Defendant
by virtue of the Plaintiff’s own conduct and liability due and owing to the
Defendant.

SIXTH
AFFIRMATIVE DEFENSE

Plaintiff’s claims are barred by a failure to mitigate.

SEVENTH
AFFIRMATIVE DEFENSE

Plaintiff’s claims are barred by a failure to satisfy a condition
precedent.

EIGHTH
AFFIRMATIVE DEFENSE

Plaintiff’s claims are barred by lack of privity between Plaintiff and
this Defendant.

NINTH
AFFIRMATIVE DEFENSE

Plaintiff’s claims are barred by the doctrine of waiver.

TENTH
AFFIRMATIVE DEFENSE

Plaintiff is barred from recovering by virtue of the doctrine of unclean
hands.

ELEVENTH
AFFIRMATIVE DEFENSE

Plaintiff has failed to comply with conditions precedent
and/or other prerequisites to asserting a claim, and Plaintiff is therefore not
entitled to any recovery.

TWELFTH
AFFIRMATIVE DEFENSE

Plaintiff’s alleged damages, if any (which are expressly
denied), were caused or contributed to by Plaintiff’s own actions or omissions,
thereby reducing the amount that Plaintiff may recover.

THIRTEENTH
AFFIRMATIVE DEFENSE

Any damages alleged to have been suffered by
Plaintiff (which are expressly denied) were caused or contributed to by
independent, superseding, and intervening causes, including the Plaintiff’s own
conduct or the conduct and actions of other third parties over whom these
answering Defendants had no control, and are therefore barred.

FOURTEENTH
AFFIRMATIVE DEFENSE

Plaintiff has approved and ratified the alleged acts of
Defendant of which Plaintiff now complains.

FIFTEENTH
AFFIRMATIVE DEFENSE

The damages alleged by Plaintiff were caused by foreseen
risks which Plaintiff had knowledge of and assumed.

SIXTEENTH
AFFIRMATIVE DEFENSE

The Plaintiff is barred from obtaining relief against the
Defendant because the Defendant’s conduct was at all times reasonable, proper,
in good faith, and in compliance with publicly available information.

SEVENTEENTH
AFFIRMATIVE DEFENSE

The Plaintiff’s claims are barred against this answering
Defendant inasmuch as Plaintiff’s claims have been rendered moot or are not
ripe for adjudication at this time.

EIGHTEENTH
AFFIRMATIVE DEFENSE

The Defendant’s conduct was not the proximate cause of the
Plaintiff’s alleged injuries or damages, if any.

NINETEENTH
AFFIRMATIVE DEFENSE

Plaintiff’s claims are barred due to the failure of
Plaintiff to record any evidence of its alleged lease and/or to post any notice
to put a reasonable purchaser on constructive notice of its purported lease.

TWENTIETH
AFFIRMATIVE DEFENSE

Defendant had no actual or constructive notice of
Plaintiff’s claims to a lease.

TWENTY-FIRST
AFFIRMATIVE DEFENSE

The laundry lease was allegedly entered into by Plaintiff
on August 5, 2011, after the Premises were listed for sale, and Plaintiff knew,
or should have known, that prospective purchasers would be unaware of the
lease, yet Dadson did nothing to place purchasers on actual or constructive
notice of the purported lease.

TWENTY-SECOND
AFFIRMATIVE DEFENSE

The agreement which forms the basis for Plaintiff’s claims
was not assignable to Defendant, was not assigned to Defendant, has not been
assumed by Defendant, and is not binding upon Defendant.

TWENTY-THIRD
AFFIRMATIVE DEFENSE

Defendant hereby incorporates by reference those
affirmative defenses enumerated in Rule 8 of the Nevada Rules of Civil
Procedure as if fully set forth at length herein.  In the event further investigation or discovery
reveals the applicability of any such defenses, Defendant reserves the right to
seek leave of court to amend this Answer to specifically assert the same.  Said defenses are incorporated by reference
for the specific purpose of not waiving the same.

TWENTY-FOURTH
AFFIRMATIVE DEFENSE

Pursuant to NRCP 11, all possible affirmative defenses may
not have been alleged herein insofar as insufficient facts were available after
reasonable inquiry upon the filing of this Answer and, therefore, Defendant
reserves the right to amend this Answer to allege additional affirmative
defenses if subsequent investigation so warrants.

WHEREFORE,
Defendant prays for judgment as follows:

                        A.        That
Plaintiff’s Complaint on file herein be dismissed with prejudice, and that
Plaintiff take nothing by reason thereof;

                        B.        For
an award of reasonable attorney’s fees and costs of the suit herein; and

                        C.        For such other relief as this Court may
deem just and proper.

THIRD PARTY
COMPLAINT

COMES NOW Third Party Plaintiff, ASCENDING GROWTH
PROPERTIES, LLC, a California limited liability company, duly qualified to do
business in the State of Nevada (hereinafter “Third Party Plaintiff”), and for
its Third Party Complaint against WENDY’S REAL ESTATE, LLC, a Nevada limited
liability company (sometimes hereinafter “Wendy’s”); and GNC PROPERTIES LLC, a
Nevada limited liability company (sometimes hereinafter “GNC”) (hereinafter
collectively referred to as “Third Party Defendants”), and DOES 1 through 10,
inclusive, and ROE COMPANIES 1 through 10, inclusive, alleges as follows:

            1.         Third Party Plaintiff, ASCENDING GROWTH
PROPERTIES, LLC, a California limited liability company, at all times relevant
herein was and is a foreign limited liability company qualified to do business
in Nevada, and which does business in Clark County, Nevada.

            2.         Third Party Defendant, WENDY’S REAL
ESTATE, LLC, is a Nevada limited liability company, which, at all material times at issue herein,
was upon information and belief, conducting business in Clark County, Nevada.

            3.         Third Party Defendant, GNC PROPERTIES
LLC, is a Nevada limited liability company, which, at all material times at issue herein, was upon information and
belief, conducting business in Clark County, Nevada.

            4.         Third
Party Plaintiff is informed and believes and, upon such information and belief,
alleges that the Third Party Defendants named herein as Does I through X and
Roe Corporations I through X, inclusive, were and are in some manner
responsible for the actions, acts and omissions herein alleged, and are,
therefore, jointly and severally liable for the damages caused to Third Party
Plaintiff, and it therefore sues said Third Party Defendants by such fictitious
names, and will move to amend this Third Party Complaint when more information
becomes available to name these Third Party Defendants by their true names.

            5.         Wherever appearing in this Third Party
Complaint, each and every reference to Third Party Defendants is intended to be
and shall be a reference to any Third Party Defendant hereto, named and
unnamed, including all fictitiously named Third Party Defendants, unless said
reference is otherwise specifically qualified.

            6.         On or about Friday, August 12, 2011,
Third Party Plaintiff signed a Residential Purchase Agreement (the “Purchase
Agreement”) with Third Party Defendants for the purchase by Third Party
Plaintiff of the Premises described therein (a four-plex) from the Third Party
Defendants.

            7.         The Premises had been listed for sale
on MLS the week before, on August 4, 2011, just eight days earlier.

            8.         Pursuant to said Purchase Agreement, on
or about August 26, 2011, Third Party Plaintiff acquired title to the parcel of
real property referenced therein, located in Clark County, Nevada, more
commonly known as 2522 McCarran Street, North Las Vegas, Nevada 89030 (hereinafter
the “Premises”).  A copy of the Grant,
Bargain, Sale Deed from Third Party Defendants to Third Party Plaintiff is
attached hereto as Exhibit “A” and by this reference made a part hereof.

            9.         No mention was made by Third Party
Defendants, verbally or in writing, or in any of the sales documents, contracts
and/or other related escrow documents, of any alleged lease agreement relating
to the purported laundry facility on the Premises, or regarding the ownership
of the two machines located therein, even though Wendy’s and GNC had apparently
entered into a lease with respect thereto, which was dated on or about July 31,
2011, but apparently signed on August 5 2011.

            10.       Whichever date it was signed, it was
clearly entered into only days before the Residential Purchase Agreement was
signed.

            11        Upon information and belief, the laundry
lease was signed either just before or just after  the Listing Agreement placing the four-plex
on the market for sale.

            12.       Furthermore, the Purchase Agreement
contains an express covenant at paragraph 8 thereof that Seller will transfer
“marketable title to the Property free of all encumbrances other than ...
obligations assumed and encumbrances accepted by Buyer prior to [close of
escrow].”

            13.       The Premises became subject to an
encumbrance upon the execution of the purported laundry lease by Third Party
Defendants prior to the close of escrow, and that encumbrance was not disclosed
to, assumed by, nor accepted by Buyer (Third Party Plaintiff) at any time.

            14.       Indeed, Third Party Plaintiff, not
knowing of the existence of the purported lease relating to the laundry
facility, could not have executed any assumption of the purported lease
agreement, nor did it agree in any manner to assume any responsibility or
liability for the same, nor for any payments due thereunder to either Wendy’s,
GNC, or Dadson Washer Service, Inc.

            15.       In addition to the foregoing, paragraph
4(A) of the Residential Purchase Agreement provided as follows:

 

4.         FIXTURES
AND PERSONAL PROPERTY:
The following items will be transferred, free
of liens
, with the sale of the Property with no real value unless
otherwise stated herein.  Unless an item
is covered under Section (E) of this Agreement, all items are transferred in an
AS IS” condition.

 

A.        All
EXISTING fixtures and fittings including, but not limited to: electrical,
mechanical, lighting, plumbing and heating fixtures, ceiling fan(s), fireplace
insert(s), gas logs and grates, solar power system(s), built-in appliance(s),
window and door screens, awnings, shutters, window coverings, attached floor
covering(s), television antenna(s), satellite dishe(s), private integrated
telephone systems, air coolers/conditioner(s), pool/spa equipment, garage door
opener(s)/remote control(s), mailbox, in-ground landscaping, trees/shrub(s),
water softener(s), water purifiers, security systems/alarm(s);

B.        The following additional items of personal property:
Appliances and fixtures in all 4 units.

 

[Emphasis supplied.]

            16.       Based
on the foregoing language, Third Party Plaintiff had reason to believe that all
personal property and fixtures located on the Premises were conveyed to Buyer
(i.e., Third Party Plaintiff) by Sellers (Third Party Defendants) free of any
liens, as they had no reason to be aware of the existence of any lease.

            17.       Dadson
Washer Service, Inc. subsequently repossessed the equipment in the laundry room
located on the Premises for non-payment under the purported laundry lease
agreement when Third Party Plaintiff refused to recognize that any purported
lease terms were binding upon Third Party Plaintiff.

            18.       Third Party Defendants intentionally
conspired to deceive Third Party Plaintiff and to defraud it by failing to
disclose the existence of an alleged lease relating to the purported laundry
room facility on the Premises, or to inform Third Party Plaintiff of the
possibility that claims might be brought against Third Party Plaintiff based
thereon.

            19.       Third Party Defendants intentionally and
fraudulently conspired with each other to defraud Third Party Plaintiff by
concealing the existence of the purported lease relating to the laundry room
facility on the Premises from the Third Party Plaintiff as the purchaser of the
Premises, even though the lease was signed just days prior to the execution of
a Purchase Agreement for the sale of the Premises.

            Plaintiff, in the
underlying complaint, has sued Third Party Plaintiff seeking damages and
alleging breach of contract relating to the laundry lease.

FIRST CAUSE OF
ACTION

(Express
Contractual Indemnity)

            21.       Third Party Plaintiff repeats and
realleges each and every allegation above and incorporates such as if fully set
forth herein.

            22.       Third Party Defendants breached the
Purchase Agreement, including the covenant at paragraph 8 thereof to convey
“marketable title to the Property free of all encumbrances other than ...
obligations assumed and encumbrances accepted by Buyer prior to [close of
escrow].”

            23.       Third Party Defendants also breached the
express covenant and warranty contained in Paragraphs 4A and 4B, obligating
them to convey fixtures and personal property, including appliances and
fixtures on the Premises free of any
liens
.

            24.       Third Party Defendants were the “Seller”
under the Purchase Agreement. 

            25.       Under Paragraph 18C of the Purchase
Agreement, if the Seller defaulted in its performance under the Purchase
Agreement, the Buyer reserved all “legal and/or equitable rights against
Seller, and have a right to “seek to recover Buyer’s actual damages incurred by
Buyer due to Seller’s default.”

            26.       Third Party Defendants’ breaches and
violations of the above-referenced covenants and warranties contained within
the Purchase Agreement constitute a breach and default of the express covenants
and obligations contained in said agreement, entitling Buyer to enforce all
legal and/or equitable rights for indemnity, contribution, damages, losses and
so forth, including recovery of Buyer’s actual damages incurred due to said
default.

            27.       Plaintiff, Dadson Washer Service, Inc.,
has brought suit against Third Party Plaintiff seeking damages relating to the
purported laundry lease executed by Third Party Defendants, and not disclosed
to nor accepted by Third Party Plaintiff, thereby causing damages to Third
Party Plaintiff and entitling Third Party Plaintiff herein to seek indemnity,
contribution and damages from Third Party Defendants related to the breach of
and default under the Purchase Agreement.

            28.       In addition to all of the express
covenants contained in the Purchase Agreement, the conveyance of the Premises
was made by a Grant, Bargain, Sale Deed, which form of deed in the State of
Nevada contains certain express covenants on the part of the grantors (Third
Party Defendants).

            29.       Among those covenants, as described in
NRS 111.170(1), is that “previous to the time of the execution of the
conveyance the grantor has not conveyed the same real property, or any right,
title, or interest therein, to any person other than the grantee.”

            30.       In light of the purported laundry lease,
a leasehold interest in the Property had already been allegedly conveyed to
Plaintiff, such that Third Party Defendants breached the express covenant
outlined above in the Grant, Bargain, Sale Deed, when they signed said deed in
favor of Third Party Plaintiff.

            31.       Another express covenant contained in the
Grant, Bargain, Sale Deed, as also set forth in NRS 111.170(b ), is that  “at the time of the execution of the
conveyance, [the property is] free from encumbrances, done, made or suffered by
the grantor, or any person claiming under the grantor.” 

            32.       The foregoing express covenant contained
within the Grant, Bargain, Sale Deed executed by Third Party Defendants in
favor of Third Party Plaintiff was also breached and violated by virtue of the
fact that the conveyance was made subject to a laundry lease which was entered
into by the grantor prior to executing said Grant, Bargain, Sale Deed.

            33.       The foregoing express covenants,
contained in the Grant, Bargain, Sale Deed, as described in NRS 111.170 were
breached and violated, thereby entitling Third Party Plaintiff to
indemnification from Third Party Defendants for all costs, losses and expenses
incurred as a result of said violations of express covenants and breaches of
the foregoing covenants and obligations.

            34.       As a result of the breaches by Third
Party Defendants, Third Party Plaintiff has incurred damages in an amount in
excess of $10,000.00, for which it is now entitled to judgment against Third
Party Defendants, jointly and severally.

            35.       It has been necessary for Third Party
Plaintiff to retain the services of attorneys to prosecute this matter and
Third Party Plaintiff is entitled to recover attorneys’ fees, costs and
expenses incurred in having to prosecute this action.

SECOND CAUSE OF
ACTION

(Equitable
Indemnity/Contribution)

            36.       Third Party Plaintiff repeats and
realleges each and every allegation above and incorporates such as if fully set
forth herein.

            37..      The sales documents, contracts and
disclosures entered into by and between the parties failed to disclose the
existence of the alleged lease relating to the purported laundry facility on
the Premises, or that any other party had a leasehold claim inside or outside
of the small laundry facility.

            38.       Based on the language of paragraph 4(A)
of the Purchase Agreement, conveying all personal property and fixtures located
on the Premises free of any liens, Third Party Plaintiff had no reason to be
aware of any lease or encumbrance affecting any of the personal property or
laundry facilities on the Premises at the time of sale.

            39.       Additionally, Paragraph 8 of the Purchase
Agreement contained a covenant that title to the Premises themselves would be
transferred free and clear of all encumbrances, and the alleged laundry lease
creates an encumbrance on title that was not assumed nor accepted by Buyer
(Third Party Plaintiff).

            40.       Third Party Defendants breached the terms
of the Purchase Agreement, along with the additional contract documents signed
relating thereto, by failing to disclose the existence of the alleged lease
relating to the purported laundry facility on the Premises.

            41.       Third Party Defendants were liable under
the lease with Plaintiff, Dadson Washer Service, Inc., and failed to disclose
the alleged existence of the purported lease on the laundry facilities by
failing to provide such notice and by failing to record any notice of the
alleged lease to give statutory or constructive notice to Third Party Plaintiff
regarding the existence of such purported lease through the Clark County
Recorders’ Office.

            42.       The failure of Third Party Defendants to
disclose the existence of the alleged lease agreement, or to record any
evidence of the lease, and the lack of any reason for any constructive
knowledge of notice, caused Dadson Washer Service, Inc. to bring its complaint
against Third Party Plaintiff for breach of the alleged lease agreement, such
that Third Party Defendants are now required and responsible to indemnify Third
Party Plaintiff for all costs, losses and expenses incurred in said action,
including due to their primary liability to Plaintiff, Dadson Washer Service,
Inc., and which is greater than the previously claimed liability of Third Party
Plaintiff.

            43.       As a result of the breaches by Third
Party Defendants, Third Party Plaintiff has incurred damages in an amount in
excess of $10,000.00, for which it is now entitled to judgment against them,
jointly and severally.

            44.       It has been necessary for Third Party
Plaintiff to retain the services of attorneys to prosecute this matter and
Third Party Plaintiff is entitled to recover attorneys’ fees, costs, and
expenses incurred in having to prosecute this action.

THIRD CAUSE OF ACTION

(Punitive Damages)

            45.       Third
Party Plaintiff repeats and realleges each and every allegation above and
incorporates such as if fully set forth herein.

            46.       Third
Party Defendants have acted with a conscious and intentional reckless disregard
for the rights of Third Party Plaintiff and/or with the intent to harm him, and
their actions have been malicious, fraudulent and oppressive.  As a direct result, Third Party Plaintiff has
been damaged and it is entitled to recover punitive and exemplary damages
against Third Party Defendants..

            WHEREFORE,
Third Party Plaintiff prays for judgment as follows:

                        A.        For
general damages in excess of $10,000.00;

                        B.        For
special damages in excess of $10,000;

                        C.        For
equitable relief including constructive trust, unjust enrichment and
disgorgement of profits, and for an accounting;

                        D.        For
punitive damages in excess of $10,000;

                        E.         For
reasonable costs and attorney’s fees; and

                        F          For such other and further relief as the Court deems
proper.

            DATED
this _____ 16a14 of September, 2014.

 

ALBRIGHT, STODDARD, WARNICK & ALBRIGHT

 

 

________________________________________

G. MARK
ALBRIGHT, ESQ.

Nevada Bar No.
001394

801 S. Rancho
Drive, Suite D-4

Las Vegas,
Nevada  89106

(702) 384-7111

Attorneys for Defendant/Third Party Plaintiff

 



Nevada Mechanic's Lien and Personal Liability

 

 

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.

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 move, pursuant to NRCP
60(a), NRCP 60(b), WDCR 12(8), and NRS 108.237, for clarification or relief
from certain of the language in this Court’s September 5, 2014 Costs Order and
its September 8, 2014 Attorneys’ Fees Order, to indicate that the amounts
awarded thereunder are not ordered to be paid by Defendants, but are
adjudicated as awarded on the Plaintiff’s lien, and as part of the lienable
amount thereof.  Movants hereby seek this
clarification and correction from this Court of any language in these Orders
which might be otherwise 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.  This Motion
is made and based upon the Points and Authorities set forth hereinbelow, all
the pleadings and papers on file with this Court, and any arguments of counsel
made at any hearing of this matter. 

            DATED
this  _____day of September, 2014.

 

 

By_________________________________________

G.
MARK ALBRIGHT, ESQ. (Nv 001394)

                                                                        D.
CHRIS ALBRIGHT, ESQ. (Nv 004909)

                                                                        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

 

                                                                        C.
NICHOLAS PEREOS, ESQ. (Nv 000013)         

                                                                        1610
Meadow Wood Lane, Suite 202

                                                                        Reno,
Nevada 89502

                                                                        Tel:  (775) 329-0678

                                                                        Attorneys
for Applicants/Defendants

 

                     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

 

I.          Statement
of Facts and Explanation of Nature of Relief Sought

 

                        A.        Introduction and Status.

 

            This lawsuit (the second of the two
suits consolidated in this matter) was brought by Plaintiff Mark Steppan
(“Steppan”) on May 4, 2007 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”) 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 Property from the Iliescus, which purchase never closed.  FFA had directed Steppan, its sole
Nevada-licensed architect, to execute the subject contract 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. 

            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 owner and FFA’s
employees and FFA’s hired subcontractors, relating to the proposed development
at the Property which never took place. 
The Decision ordered that the parties engage in subsequent proceedings
in order to establish the final amount of the Lien, after which a Judgment will
presumably enter herein allowing the relief sought in the Complaint, namely,
foreclosure of the Mechanic’s Lien against the Property, in an amount to be
established by this Court’s Judgment. 
This Court has not yet issued that Judgment arising out of the Decision,
but has instead received arguments on costs and fees and other matters
subsequent to entry of its Decision, and has now issued a pre-Judgment “Order
Regarding Plaintiff’s Motion for Costs” on September 5, 2014 (hereinafter the
“Costs Order”), and a similar pre-Judgment “Order Regarding Motion for
Attorneys’ Fees” on September 8, 2014 (hereinafter the “Fees Order”).  The Court’s Judgment will presumably
incorporate the amounts set forth in these Orders as components of the
Plaintiff’s Mechanic’s Lien to be upheld and allowed to be foreclosed on by
that Judgment. 

            Certain of the language in these
Orders concerns the Defendants who therefore wish to obtain this Court’s
correction or clarification thereof, as sought herein.

            (Defendants intend to file a motion
or motions, within the time allotted after the Court enters its Judgment, under
Rule 52(b) for amendment to this Court’s findings or for additional findings,
and under Rule 59, to alter or amend the Judgment, or for new trial, which will
attack the Court’s upholding of the “Steppan” lien for FFA’s services on
various grounds to be set forth within those motions.  Those matters are not part of this Motion,
however.  Rather, the present motion is
filed, assuming solely arguendo that the Steppan Lien for FFA’s services and
FFA’s invoices will continue to be upheld, in order to ensure that the effect
of this Court’s two Orders is clarified and properly set forth under Nevada’s
Mechanic’s lien laws.)

                        B.        Relief Sought.

            The Costs Order indicates that
Plaintiff is awarded costs in the amount set forth therein ($21,550.99) and the
Fees Order indicates “it is hereby ORDERED that Defendants shall pay attorney
fees in the amount of $161,727.50.”  The
Defendants are concerned that this language, especially the language of the
Fees Order, could be misconstrued to be equivalent to some sort of personal
judgment against the Defendants for costs and fees, or an injunction ordering
and requiring them to pay the fees in their own capacity, or allowing Plaintiff
to try to establish some sort of claim against them beyond the value of the
Property subject to foreclosure sale to satisfy the Plaintiff’s Lien.  However, under Nevada Mechanic’s lien law,
these costs and fees should simply be part of the calculations necessary in
order to determine the amount of the Mechanic’s Lien, which Mechanic’s Lien may
then be satisfied by a foreclosure sale of the Property against which the Lien
attaches, without any liability on the part of the Defendants for any amounts
which are unable to be satisfied by the Lien foreclosure sale of the Property.

            Defendants wish to ensure that this
point is clear, and that they are not liable on their own account, in their own
individual or trustee capacity, for any amount which is awarded to Plaintiff as
part of his Mechanic’s Lien Judgment. 
Defendants raise this concern because of the language of the Orders
themselves, which, in combination with certain arguments which Plaintiff has
raised heretofore, strongly suggests that this probability needs to be guarded
against.

            Accordingly, this Motion is simply
brought to ensure that this Court’s Costs Order and Fees Order are clarified as
relating only to costs and attorneys’ fees amounts which will be made part of
the amount of the Lien, and that any language in said orders which might be
construed as indicative of an award or judgment having been made against the
Defendants themselves (as opposed to a claim against their Property) be amended
and corrected or clarified.  Such relief
is available to the Defendants either under NRCP 60(a) allowing “Relief from
judgment or order” in the event this Court’s possibly misleading language was
merely a clerical error, or 60(b) on the grounds of other inadvertence or
mistake which may have led to the same, or under WDCR 12(8), which contemplates
reconsideration of an Order within ten (10) days from notice of entry thereon.

            This Court’s Orders point out that the
mechanic’s lien statutes are remedial in character and should be liberally
construed in light of the public policy of allowing laborers security for their
claims.  This is true, but it is also
true, as pointed out by the Court in J.D.
Constr. Inc. v. IBEX Int’l Group LLC
, 126 Nev. Adv. Op. 36, 240 P.3d 1033,
1041 (2010) that a mechanic’s lien is a taking and a property owner whose
property is subject to a lien is therefore entitled to certain due process
rights, such that, in construing the lien statutes,  “both the property owner and the lien
claimant's rights must be addressed” as equally important.  Id.  Neither party should be considered as
entitled to any presumptions in their favor beyond a plain application of the
actual statutory language.

II.        Legal Analysis and Explanation of
Basis for Relief  Sought

                        A.        NRS 108.237 Establishes the Amount
Awardable On the Lien.

            Should Plaintiff continue to prevail
herein, following post-judgment motions and appeals, the relief to which
Plaintiff is entitled is not a money judgment against the Defendants
individually or in any other capacity other than as the owners of the Property
subject to the lien, capped with respect to the value of that lien.  That is to say, Plaintiff’s relief at law
under the single cause of action set forth in his pleading, on which he has for
now prevailed, is a judgment recognizing that he has a Mechanic’s Lien which he
can foreclose on against the Defendants’ Property.  However, Defendants are not personally liable
for any of that Judgment beyond the value of the Property, but, rather their
Property is only subject to being sold to satisfy the Mechanic’s Lien, solely
up to the fair market value of that Property, as determined at the foreclosure
auction sale thereof. 

            NRS 108.237, the grounds on which
fees and costs were sought by Plaintiff, and cited by this Court’s Costs Order
and by its Fees Order, sets forth the remedy available to a Plaintiff in such a
case, and where the mechanic’s lien has not been substituted with a surety bond:

The Court shall
award to a prevailing lien claimant . . . on
its lien
. . . the lienable amount found due to the lien claimant by the
court and the cost of preparing and recording the notice of lien, including,
without limitation attorney’s fees, if any, and interest.  The court shall also award to the prevailing
lien claimant . . . on its lien . .
. the costs of the proceedings, including, without limitation, reasonable
attorney’s fees,  the costs for
representation of the lien claimant in the proceedings, and any other amounts
as the court may find to be justly due and owing to the lien claimant.

 

[Emphasis added.]

 

            Thus, a lien claimant is entitled to
an award “on its lien” for (1) the lienable amounts due and owing and lienable
in the first place as owing to the lien claimant for the work the lien claimant
or those it hired performed, plus (2)
costs, attorneys’ fees, and interest.  

                        B.        NRS 108.239 Establishes How The Amounts
Awarded Are To Be Obtained.

            How does and to what extent can the
lien claimant then recover any of these amounts which have been awarded under
NRS 108.237?  That question is answered
by NRS 108.239(10), which provides that those amounts “including all amounts
awarded . . . pursuant to NRS 108.237" are to be included in the amount of
the lien upheld by the Court as encumbering the property subject thereto, as
follows: “(10) On ascertaining the whole
amount of the liens with which the
property
is justly chargeable
, as provided in NRS 108.221 to 108.246
[i.e., the mechanic’s lien statutes], inclusive, 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
" via the same type of process used
for a judgment execution sale. NRS 108.239(10) [emphasis added]. 

C.        The Owners of Property
Subject to a Mechanic’s Lien Are Not Liable For Deficiencies Beyond the Value
of the Property, Under NRS 108.239(12), But Rather, that Section Applies to the
Originally Liable Parties.  

 

            If the amount recovered from this
sale are not sufficient to satisfy the lien, then, with respect to any
deficiency, the lien claimant may pursue the party who originally hired the
lien claimant to perform the work, and who failed to pay his bill, provided the
lien claimant named such customer in his original lien foreclosure lawsuit,
which lawsuits typically name not only the property owner under a lien
foreclosure cause of action, but also the lien claimant’s original customer
under a breach of contract theory: “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).

            Who is “the person legally liable
for” the residue in the case of a deficiency? 
Nevada law answers this question very simply, as demonstrated
below:  it is the person who was originally
liable for the debt, i.e., the party with whom the lien claimant had a
contract, and who failed to pay the lien claimant on that contract.  This is not a particularly controversial
question as the law in this area is well established.  Nevertheless, Defendants anticipate that
Steppan will argue that the property owners are somehow made personally liable
for any such residual deficiency amount, beyond the value of their property,
even though the whole point of mechanic’s lien law is simply to provide that an
owner’s property benefitted by improvements thereon may be treated as security
for the amount owed for those benefits, NOT to make the landowner personally
liable on his own account for claims which the landowner did not not personally
agree to guaranty or contract for. 

            Defendants’ anticipation that Steppan
will make such a bizarre assertion is based on a claim made in Steppan’s Trial
Statement, which requested a ruling from this Court that “[if] the proceeds
from the sale [of the mechanic’s lien foreclosure] do not satisfy the amount of
the judgment, then the judgment creditor is entitled to personal judgment
against the property owner for the deficiency (or ‘residue’) if the property
owner has been personally summoned or appeared in the action.”  See,
Mark B. Steppan’s December 4, 2013 Trial Statement, at page 14, lines 16-21.

            This novel and bizarre
theory, to create personal liability on the part of any of these Iliescu
Defendants (beyond the amount recoverable through foreclosure of the mechanic’s
lien), as well as Plaintiff’s claimed basis for the same, are absolutely and
manifestly, false statements as to the clear law of the State of Nevada, and
must be rejected in their entirety. 
There is no basis, as Steppan claims, for him to “apply to the court for
a personal judgment against Iliescu” if “the net sale proceeds [from the
mechanic’s lien foreclosure sale] are less than the monetary amount of the
judgment.”  (Id., at 14, lines 21-24.) 
Steppan’s indication that he may seek just such a step, brings about the
present Motion, to ensure that the language of this Court’s recently issued
Orders are not utilized by Steppan as support for such an erroneous legal
theory at some future date.  Thus, this
Court should ensure that its Fees Order and Costs Order are clarified as
awarding costs and fees “on the lien” and to be made a part thereof.  Plaintiff is not entitled to any
personal deficiency against Movants even in the event that the lien claim
continues to be upheld by this Court and on appeal, even should the Property
not be of sufficient value to fully satisfy the amount of the lien as so
adjudicated.  Steppan’s argument to the
contrary is based on a deliberate misreading in his Trial Statement of NRS
108.239(12).

            A mechanic’s lien
provides additional security and protection to a contractor who has performed
work under contract for which the contractor has not been paid.  The fact that a mechanic’s lien proves
insufficient to pay the contractor does not, however, prevent the contractor
from nevertheless seeking personal judgment for any post-foreclosure residue or
deficiency still owed, as against the party with whom he contracted, as
the person who is and has always been “legally liable for” payment to the
contractor, or against any other party (such as the contractor’s customer’s
guarantor) who would otherwise have been “legally liable for” paying the
contractor, even where no mechanic’s lien existed, or any mechanic’s lien that
did exist proved insufficient. 

            This is a very simple
principle of law, clarified by 108.239 at subsection (12) merely in order to
avoid the possibility of any argument that might otherwise be made that
mechanic’s lien rights entirely replace or supplant a contractor’s rights to
seek other more traditional remedies, such as a contractor merely obtaining a
money judgment against his or her customer. 
This simple principle is also clarified by NRS 108.238 (“The provisions
of [the mechanic’s lien statutes] must not be construed to impair or affect the
right of a lien claimant to whom any debt may be due for work, material or
equipment furnished to maintain a civil action to recover that debt against the person liable therefor . .
. .”)[Emphasis added.]   (It should be
noted that the clarification in subsection 12 of NRS 108.239 is not merely
redundant of NRS 108.238, in that NRS 108.239(12) also provides procedural
instruction, that the party legally liable for the debt should also be made a
party to the lien foreclosure and breach of contract suit.)

            The assertion that this statute
magically transforms the owner of real property which is subject to a lien, to
suddenly become a personal guarantor who is legally and personally liable for
any amounts unable to be satisfied from the lien, simply by being summoned and
appearing in the lien foreclosure action, even where said party had no contract
with the lien claimant and no theory exists or has been sued upon for such
personal liability, is simply not what the statute says, on its face, by any
reasonable construction.  Rather, on its
face, the statute merely provides that in order to seek a personal judgment for
the residue, “the party” who would in any case otherwise be “legally liable
for” the payment to the claimant, remains liable for that residue if “that
person” (whoever it may be, typically the lien claimant’s contract customer, in
this case BSC and Pacific Consolidated, as identified in this Court’s Decision)
has been personally summoned and appeared in the action.  Plaintiff in this case chose not to name the
actual customer, BSC/Consolidated, for its own reasons, as a defendant herein.  However, it is otherwise almost always the
case that a mechanic’s lien foreclosure action will usually name the lien
claimant’s customer, and include breach of contract causes of action against
that customer, in addition to naming the owner of the property on a separate
mechanic’s lien foreclosure cause of action.

            Setting aside the serious
Constitutional due process concerns which Plaintiff’s construction of the
statute would raise, if subsection 12 of NRS 108.239 were intended to render
the owner legally and personally liable for the residue of any mechanic’s lien
claim unable to be satisfied from the value of the real property subject to the
lien, regardless of whether there were any other contractual or legal grounds
for that owner’s personal liability, then that is what the statute would be
written to say.  It is not however so
written.  For example, such an intention
could have been expressed via the legislature indicating that any party whose
claim is not satisfied from the foreclosure of the mechanic’s lien “is entitled
to personal judgment for the residue or deficiency against the owner of the property subject to the lien.”  However, that is not what the statute says, for the simple reason that that is not what the statute was intended to
mean
.

D.        Longstanding Nevada Law Establishes the
Correct Legal Rule.

            It has been the undisputed and
repeatedly upheld law of the State of Nevada for over 80 years 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 where the owner is also the party who contracted with the lien claimant
directly.  This Court has already ruled
in this case in its Decision that no such contract existed between the owner
and the lien claimant.

            In Didier v. Webster Mines Corp., 49 Nev. 5, 234 Pac. 520 (1925) the
Nevada Supreme Court noted that a real property owner, whose land was subject
to a statutory mechanic’s lien in favor of a miner was not personally liable
for any amount of the miner’s lien claim which could not be satisfied from the
lien on the real property, in the absence of privity of contract between the
real property owner and the lien claimant. 
This case is still valid Nevada law and has never been overturned.

            Likewise, in the more
recent 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)) the Court ruled
against the very assertions which were improperly raised by Steppan in his
Trial Brief, and did so in reliance on case law which had been in effect for
decades.  Among other issues, the Snyder case involved a claim by the
mechanic’s lien claimant that a bank which had taken ownership of real property
as a foreclosing mortgagee had become liable, as the owner, for any “residue”
or balance owed to the mechanic’s lien claimant, not able to be satisfied
through the mechanic’s lien foreclosure sale. 
This was the same theory now asserted by Steppan, and it was raised on
the same invalid grounds.  The Court
firmly rejected this contention, explaining as follows:

The
district court judgment stated that [mechanic’s lien claimants] C & R and
Depner were entitled to a “personal judgment for the residue against the Bank.”
The Bank 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 Depner's and C & R's 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.  Further, the
statutory language regarding deficiencies and personal actions is illuminating
here. NRS 108.238 provides:

 

Right to maintain personal action for debt
not impaired
. Nothing contained in NRS 108.221 to 108.246, inclusive, shall
be construed to impair or affect the right of any person to whom any debt may
be due for work done or material furnished to maintain a personal action to
recover such debt against the person liable
therefor.

                  (Emphasis added.)

 

            It is unjust to hold the Bank
personally liable for a deficiency when
it was not a party to the C & R/Benny contract
, and because the Bank 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)(bolded emphasis added, italicized emphasis in
original)(partially abrogated on other
grounds
by Executive Mgmt Ltd. v.
Ticor Title Ins. Co.
, 118 Nev. 46, 38 P.3d 872 (2002)).

      This precise analysis is equally
applicable herein.  This court has
already ruled that Iliescu was not a party to the contract with Steppan.  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 legal
argument which has already been presented to the Nevada Supreme Court and was
entirely rejected.

      Indeed, the Nevada Supreme Court
in Snyder also rejected the
argument that the owner could be held liable for the residue on some sort of
“unjust enrichment” theory, noting as follows:

            C & R and Depner argue that the
Bank was unjustly enriched, because the work they performed increased the value
of the property, and the Bank should be held personally liable for any
deficiency. C & R and Depner contend that the Bank relied on their work to
increase the value of the land and therefore the principle of unjust enrichment
is applicable.

 

            While there was a benefit conferred
on the Bank, 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.

 

      Id.  (Emphasis supplied.)

 

      Of course, in the present
case, any claim for unjust enrichment would be 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 Iliescu’s property, after all was said and done, and
the project for which those plans were drawn up 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.  The
instruments of service prepared by the architects belong to someone else (FFA
and Rodney Friedman), not Mr. Iliescu. 
Mr. Iliescu could not use or benefit from the architectural drawing even
if he wanted to. 

      Moreover, Steppan’s Complaint
against the Iliescu Defendants initiating his present lawsuit, did not in any
event even make any claim for unjust enrichment, but listed only one cause of action: namely,
“foreclosure of mechanic’s lien” against Iliescu’s property.  If Plaintiff now wished to assert any other
causes of action, such as for breach of contract, unjust enrichment, etc.,
against the Iliescu Defendants, in order to claim that the Iliescu Defendants
are somehow now a “party legally liable” for the amounts due, rather than
simply landowners whose real property is lienable for the amounts due up to the
value of the Property, then Plaintiff should have included such causes of action
in his Complaint, or moved to amend in accordance with the deadlines set during
the maintenance of this litigation, and before the expiration of the applicable
statutes of limitation, many long years before now.  (Of course, even had Plaintiff done so, such
alternative causes of action would have been legally invalid and rejected.)

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 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 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 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 only based on a Lien foreclosure sale of that Property, any such
contentions must be summarily rejected. 
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 that the
Defendants are required to pay attorneys’ fees to the Plaintiff must be
stricken from the Fees Order. 

            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

 

C. NICHOLAS
PEREOS, ESQ.

Nevada Bar
No. 0000013

1610 Meadow
Wood Lane, Suite 202

Reno, Nevada
89502

Tel:     (775) 329-0678

Attorneys for Defendants

 

AFFIRMATION

 

      The undersigned does hereby affirm that
the preceding document filed in the Second Judicial District Court does not
contain the social security number of any person.

 

      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

 

Attorneys for Defendants

 

 

 

Albright Receives Top 10 Personal Injury Attorney Award in 2014

 

We are pleased to announce that Mark Albright was selected this year as one of the "10 Best" Attorneys for the State of Nevada by the American Institute of Personal Injury Attorneys (AIOPIA).  The AIOPIA is an impartial third-party Attorney rating service recognzing excellence of fellow practitioners in the field of Personal Injury law.  Mr. Albright made the exclusive list of the "10 Best" Personal Injury Attorneys for the State of Nevada due to the following:

1) Being formally nominated by a fellow Attorney;

2) Having attained the highest degee of professional achievement in his field of law; and

3) Having an impeccable Client Satisfaction rating.

This award demonstrates Mark's committment to the personal injury field and his level of approval by both his peers and most importantly, his clients.

 

 

 

Commercial Landlord's Brief on Appeal (Commercial Eviction)

 

 

G.
MARK ALBRIGHT, ESQ.

Nevada
Bar No. 001394

ALBRIGHT,
STODDARD, WARNICK & ALBRIGHT

801
South Rancho Drive, Suite D-4

Las
Vegas, NV  89106

Tel:     (702)
384-7111

Fax:    (702)
384-0605

gma@albrightstoddard.com

Attorneys for
Plaintiff/Landlord/Respondent

 

 

                                           EIGHTH
JUDICIAL DISTRICT COURT

 

                                                     CLARK
COUNTY, NEVADA

 

 

 

JOHN
  D. HU, ESQ

 

Appellant.

 

V.

 

HARSCH INVESTMENT PROPERTIES -
  NEVADA, LLC, an Oregon limited liability company, qualified to do business in
  Nevada, ,

 

Respondent.

 

C
  ASE NO.                       A693647

 

DEP
  NO.: XXIV

 

 

 

RESPONDENT=S  BRIEF ON APPEAL

 

 

COMES
NOW, Respondent, HARSCH INVESTMENT PROPERTIES - NEVADA, LLC, an Oregon limited
liability company, qualified to do business in Nevada (hereinafter ALandlord@ or ARespondent@), by and through its attorneys of record,
ALBRIGHT, STODDARD, WARNICK & WARNICK, and hereby submits its Appeal Brief.

                                                                                                                                         INTRODUCTION

This
case is Anot to be tried anew@ See, Rule76A, Justice Court Rules of
Civil Procedure.  The trial court judge
is free to judicially and reasonably exercise its discretion determining and
making its decision.  The sound
discretion of the trial court shall not be disturbed on review unless there has
been a clear abuse of discretion.  A
court does not abuse its discretion when the court reaches a result which could
be found by a reasonable judge.  Goodman
v Goodman
, 68 Nev. 484, 236 P.2d 305 (Nev. 1951).  Moreover, the term Adiscretion@ implies the absence of a hard and fast
rule.  Id.



Here, the appellant=s sole defense to the Judgment of Eviction
is that he thought he had a verbal agreement from the landlord for a two year
extension.  Additionally, appellant
failed to appear at the trial, having attended a pre-scheduled court hearing in
Los Angeles, California, that same morning.

                                                                                                                      NEVADA
STATUTE OF FRAUDS

                        NRS 111.220 provides when
agreements not in writing are void.  This
statute of frauds provides in pertinent part as follows:

AIn the following cases, every agreement is
void, unless the agreement, or some note or memorandum thereof expressing their
consideration, is in writing, and subscribes by the person charged
therewith: 

 

(1)                 Every agreement that, by the terms, is not to be
performed within one year from the making thereof.@

 

This statute is simple and
so are the cases which have construed it in Nevada.  The Nevada Supreme Court in Zunino v.
Paramour
, 435 P.2d 196, 83 Nev. 506 (1967) held that a verbal commitment by
a landlord to give a lease for three years and one month was within the statute
of frauds and thus was required  to be in
writing. 

The Nevada Supreme Court has
also held that a promise to execute a written agreement, without any proof of
fraud, is insufficient to invoke the estoppel argument against the use of the
statute of frauds as a defense, as found in NRS 111.220.  See, Edwards Industries Inc. v.
DTE/BTE Inc
., 923 P.2d 569, 112 Nev. 1025 (1996).

Indeed, the court in Zunino
v. Paramour
mentioned that estoppel or part performance sufficient to take
an oral agreement out of the statute of frauds for contracts in excess of one
year must be proven by some Aextraordinary
measure or quantum of evidence.@  Zunion, 435 P.2d 196, 83 Nev. 506
(Nev. 1967). 

Other cases in Nevada
confirm this long established principal. 
For example, in Harmon v. Tanner Motor Tours of Nevada, Ltd., 377
P.2d 622, 79 Nev. 4 (Nev. 1963), the court held that generally, in the absence
of fraud, a promise to reduce a verbal agreement to writing is not, standing
alone, a sufficient basis to invoke the promissory estoppel arguments against
raising the statute of frauds in defense.



In
this case, the appellant=s
unsupported and unsubstantiated claim that someone at the landlord=s office promised a two-year lease is
precluded by the statute of frauds. 
Moreover, the record is clear that the landlord did in fact (in January
2013) extend a written offer to extend the lease for 2 years, which the tenant
ignored and never accepted. 

                                                                                                                                     FAILURE
TO
APPEAR

With
respect to not appearing at trial, the Nevada Supreme Court in Durango Fire
Protection Inc. vs. Troncoso
, 120 Nev. 658, 98 P.3d 691 (2004) recently
explained that although the trial court may relieve a party from a final
judgment due to excusable neglect, the trial judge has wide discretion in
determining what neglect is excusable and which is inexcusable.  The Nevada Supreme Court explained as
follows:

AUpon review of the record, we conclude that
the District Court did not abuse its discretion in entering judgment against
Durango after striking its answer. 
Durango was on notice that it was required to appear at several calendar
calls and other hearings, yet failed to appear. . . .  Because NRCP 55b was not implicated by the
District Court=s
actions taken to sanction Durango, no prior notice was required and thus the
judgment is not void.  For the same
reason, we conclude that the District Court did not abuse its discretion in
denying Durango=s
Motion for release from judgment based on attorney neglect.  Although the District Court may relive a
party from a final judgment due to excusable neglect, the District Court has
wide discretion in determining which neglect is excusable and what neglect is
inexcusable. . . .  Here, however, Julian
received independent notice of the calendar calls. . . .  We therefore, conclude that the District
Court did not abuse its discretion in concluding that Durango had not
established grounds to set aside the judgment. 
As previously stated, no evidence supports Durango=s claim that it lacked knowledge of the
scheduled hearing.  Notice was mailed to
Julian=s address of record and Durango=s counsel received notice in his file at
the courthouse. . . .  The District Court
did not abuse its discretion in sanctioning Durango by striking its answer and
entering judgment in Plaintiff=s
favor.  We further conclude that when a
District Court sanctions a party in this matter, the notice requirement of NRCP
55 is not implicated.  Accordingly, we
affirm the District Court=s
Order denying Durango=s
Motion to Set Aside the Judgment.@

 

                                                                                                                                            CONCLUSION

Under
these circumstances, it is clear that there has been no error of law, no abuse
of discretion, no error of fact, and the Eviction Judgment should be summarily
affirmed.  The trial court=s judicial

/ / /

/ / /

 

[continued on Page
4]



discretion was not arbitrary or
capricious, but was firmly base on long established legal principles in Nevada
jurisprudence.

DATED this _____day of January, 2014.

ALBRIGHT, STODDARD, WARNICK & ALBRIGHT

 

 

 

___________________________________________

G.
MARK ALBRIGHT, ESQ.

Nevada Bar No. 001394

801 South Rancho Drive, Suite D-4

Las Vegas, Nevada 89106

(702) 384-7111

Attorneys for Plaintiff/Landlord/Respondent

 

 

All Posts