Originally published in Communiqé, May 2009

Nevada General Partnerships: To Be Or Not To Be . . . An Entity

by Neal A. Klegerman and Eric C. Willis

In 2005, the NRS was amended to adopt the Revised Uniform Partnership Act (1997), NRS 87.4301 to 87.4357 (“RUPA”). However, Nevada gives general partnerships the choice of either being governed by the Uniform Partnership Act, 87.010 to 87.430 (“UPA”) or RUPA. For a general partnership formed on or after July 1, 2006, the partnership must affirmatively elect to be governed by UPA, or it will be subject to RUPA. Similarly, a general partnership formed before that date is subject to UPA unless it opts in to RUPA. NRS 87.025; 87.4314. Lawyers advising clients on the formation of a Nevada general partnership should make them aware of the alternatives. As used in this article, “partnership” refers only to general partnerships and not limited partnerships.

 
Whether a partnership is an entity may be important to the client. For example, partners may wish to be contractually committed to their business enterprise, but may want to at least preserve the argument that their partnership is not an entity for purposes of some legal, business, regulatory, or international tax consequences. On the other hand, the partners may want to have some certainty that their partnership will be treated as an entity.

 
UPA states that “a partnership is an association of two or more persons to carry on as co-owners a business for profit . . . .” NRS 87.060. According to the Official Comment to RUPA § 201(a), the ambiguous nature of this provision was the catalyst behind the adoption of Section 201(a) of RUPA (NRS 87.4321), which states that “[a] partnership is an entity distinct from its partners.” The comments to RUPA make clear that RUPA Section 201(a) was intended to “allay previous concerns stemming from the aggregate theory” of partnership in light of UPA’s “ambivalence on the nature of partnerships.” Official Cmt. to RUPA § 201(a).

 
With regard to UPA, Nevada case law has done little to eliminate the ambiguity. In Watson v. G.C. Assocs. Ltd. P’ship, 100 Nev. 586, 691 P.2d 417 (Nev. 1984) the Nevada Supreme Court addressed whether a partnership could be held liable as an entity independent of its partners when the partners are immune from liability under another state statute. Watson, 100 Nev. at 588, 691 P.2d at 418. After referring to the definition of “partnership” under NRS 87.060(1), the court, citing an article written by one of the drafters of UPA, stated that “this language was intended to make clear that the act was based upon a common law or aggregate theory of partnership, as opposed to an entity theory which would have endowed the partnership as a separate legal personality.” Watson, 100 Nev. at 588-89, 691 P.2d at 418 (citing William Draper Lewis, The Uniform Partnership Act, 24 YALE L.J. 617, 638-40 (1915)). In an unreported case, the federal district court relied on Watson to state that “a partnership cannot be regarded as an entity independent of the persons who compose it.” Home Haven, Inc. v. United States, 1999 WL 691869, at *3 (D. Nev. 1999). 

 

On the other hand, as discussed below, the Nevada Supreme Court has held that, for purposes of pleading and defending litigation, a partnership is “deemed a legal entity.” Richard Matthews, Jr., Inc. v. Vaughn, 91 Nev. 583, 589, 540 P.2d 1062, 1066 (Nev. 1975). But, even so, the court noted that a “partnership is not a separate legal entity in the sense that a corporation is a legal entity.” Richard Matthews, 91 Nev. 589, 540 P.2d 1066.

 
Considering the ambiguity in UPA and the lack of Nevada case law settling this “age-long conflict,” the nature of the UPA partnership may be categorized as a “hybrid” encompassing aspects of both the “entity theory” and the “aggregate theory,” consistent with the views of UPA drafters when discussing UPA generally. Summary: Uniform Partnership Act, Uniform Law Commissioners, available at http://www.nccusl.org/Update/uniformact_summaries/uniformacts-s-upa1994.asp (last visited April 1, 2009) [hereinafter Summary: Uniform Partnership Act].

 
As noted above, other factors beyond the definitional or conceptual aspects may be relevant to the question of whether an UPA partnership is a separate legal entity. For example, one may wish to consider the following:

Factors indicating that an UPA partnership should be considered a separate legal entity.

• An UPA partnership can be sued as an entity. UPA does not explicitly address whether a partnership can sue and be sued, and at common law, a partnership—not being a legal entity—was unable to sue or be sued in the partnership’s name. Official Cmt. 1 to RUPA § 307. But Nevada, like many other states, has authorized partnerships to be sued in the partnership name in the state civil procedure statutes. See Official Cmt. 1 to RUPA § 307. NRS 12.110 states that “[w]hen two or more persons, associated in any business, transact such business under a common name . . . the associates may be sued by such common name . . . and the judgment in the action shall bind the joint property of all the associates . . . .” NRS 12.110; see also NRCP 23.1, 23.2. A partnership is “deemed a legal entity for purposes of pleading and defending litigation.” See NEV. CIV. PRAC. MAN. § 5.15 (October, 2007) (citing Richard Matthews).
• An UPA partnership can own real property in its own name. NRS 87.080. However, whether a partnership can own personal property in its own name is unclear under UPA. See NRS 87.080; see also Official Cmts. to RUPA §§ 203-204.An UPA partnership can, by implication, enter into a contract in its name. NRS 87.090 (“Every partner . . . and the act of every partner, including execution in the partnership name of any instrument . . . binds the partnership . . . .”); see also Official Cmt. to § 301 of RUPA (stating that “by virtue of partnership status, each partner has apparent authority to bind the partnership . . .”).

Factors indicating that an UPA partnership should not be considered a separate legal entity.

• The NRS states that an UPA partnership is an “association of two or more persons to carry on as co-owners a business for profit,” without reference to partnerships being considered “entities.” NRS 87.060.
• RUPA defines a partnership as “an entity distinct from its partners.” NRS 87.4321. This suggests that UPA partnerships were not “entities.”
• “No person may become a member of an UPA partnership without the consent of all the partners.” NRS 87.180(7). Although this may be varied by the partnership agreement, simply having this as the default rule appears somewhat inconsistent with the concept of a distinct entity.
• Notwithstanding the broad statement in Richard Matthews cited above, whether an UPA partnership can commence an action in its own name is unclear in Nevada. In 1868, the Nevada Supreme Court held in The Proprietors of the Mexican Mill v. The Yellow Jacket Silver Mining Co., 4 Nev. 40 (1968) that “a partnership does not have the capacity to commence suit in its own name.” NEV. CIV. PRAC. MAN. § 5.15 (October, 2007) (citing Mexican Mill). Neither UPA nor any predecessor was in effect in Nevada in 1868, so the relevance and applicability of Mexican Mill is questionable. This ambiguity has been cleared up in RUPA, which provides that “[a] partnership may sue and be sued in the name of the partnership.” NRS 87.4331. The drafters of RUPA point out that this provision is intended to simplify suits by and against partnerships. Official Cmt. 1 to RUPA § 307.
• An UPA partnership does not need to file or register to form. See NRS 87.070. While a RUPA partnership also need not file, as noted above, it is an entity pursuant to the language of RUPA.
• An UPA partnership automatically dissolves upon the death, resignation, expulsion, or bankruptcy of a partner. NRS 87.310. This aspect of UPA partnerships has been changed in RUPA, which allows continuation of a partnership notwithstanding the departure of a partner. See NRS 87.4351. It should be noted, however, that even under UPA the actual winding up of the partnership business can be avoided notwithstanding dissolution.
• Although “real property may be acquired in the name of an UPA partnership” in accordance with NRS 87.080 (emphasis added), it seems that ownership in the partnership’s name is not required. See NRS 87.080; NRS 87.100. First, NRS 87.080 uses the word “may” instead of “shall” or “must.” Second, NRS 87.100(3) and (4) indicate that title to real property may be “in the name of one or more but not all the partners.” On the other hand, RUPA provides that property acquired by a partnership is property of the partnership and not the partners individually. NRS 87.4323. Moreover, assets owned by an UPA partnership are co-owned by the partners.  NRS 87.250(1) states that “[a] partner is co-owner with his partners of specific partnership property holding as a tenant in partnership” whereas RUPA provides that “[a] partner is not a co-owner of partnership property and has no interest in partnership property which can be transferred . . . .” NRS 87.4339. As indicated in the comments to RUPA, this “section abolishes [NRS 87.250(1)] . . . and reflects the adoption of the entity theory.” Comment to RUPA § 501.

If the client wants a partnership to be an entity, then make sure RUPA applies. Although the result is ambiguous, if the client wants to preserve the argument that a partnership is not an entity, UPA is the way to go.

 
Neal A. Klegerman (nklegerman@cekcounsel.com) is a stockholder of Coppedge Emmel & Klegerman PC where he focuses on corporate and securities law and transactions. Eric C. Willis (ewillis@kkbrf.com) is an associate of Kummer Kaempfer Bonner Renshaw & Ferrario where he focuses on real estate and corporate law and transactions.

Originally Published in Communiqué, May 2009

Nevada Limited Partnerships: Rules for New (and Old) Limited Partnerships

By  Jordan Pinjuv

In 2007, the Nevada legislature adopted a new set of rules governing the formation, operation and dissolution of limited partnerships based on the Uniform Limited Partnership Act (2001) or ULPA (2001). Those newer rules, which are codified in Chapter 87A of the Nevada Revised Statutes (NRS), presumptively apply to limited partnerships established after October 1, 2007, while the original Nevada limited partnership rules contained in Chapter 88 of NRS presumptively apply to limited partnerships formed before that date. However, limited partnerships formed on any date can voluntarily elect to be governed by the non-presumptive set of limited partnership rules if the limited partnership so chooses. Understanding the differences between the statutory frameworks is crucial to properly advising clients who may be considering a limited partnership as a business entity.

What is a limited partnership?
Both chapter 87A and 88 of the NRS define a limited partnership as a business entity “having one or more general partners and one or more limited partners.” The general partners manage the business, and are liable for the debts and obligations of the partnership. Limited partners are passive investors, with little or no involvement in the day-to-day operations of the partnership. The liability of the limited partners is limited to their original investment in the entity. Typically, the general partner of a limited partnership is itself an entity with limited liability, such as a corporation or a limited-liability company.

NRS Chapter 87A Limited Partnership Act
According to the National Conference of Commissioners on Uniform State Laws (NCCUSL)—the drafters of the Uniform Limited Partnership Act (2001)—the rules adopted in Chapter 87A are intended to reflect the modern day uses of limited partnerships. Specifically, the new rules have been drafted for the use of the limited partnership in the context of manager-entrenched commercial deals and family limited partnerships. In light of the highly specialized purposes of the limited partnership, as noted in the NCCUSL’s summary, the default rules reflect a preference for strong, centralized management and passive investors with little capacity to exit the entity. Among the areas in which the new limited partnership act makes significant changes are the liability of partners, the fiduciary duties owed to partners, and the duration of and withdrawal from the limited partnership. Additionally, the new limited partnership statute is completely de-linked from the general partnership rules found in Chapter 87. In contrast, the pre-2007 limited partnership statute provides that in any case where the chapter is silent, the general partnership rules will govern.

Liability of limited partners
Some of the most significant changes to the limited partnership rules are the additional limitations on liability contained in the new act. Under the old rules, a limited partner could be held liable for the debts of the partnership if he participated in the control of the business and a third party engaged in business with the partnership under the belief that the limited partner was a general partner. The new rules provide a full shield against limited partner liability on the basis of limited partnership status, despite limited participation in the management of the limited partnership. NRS 87A.330. Additionally, the Uniform Limited Partnership Act (2001) made the limited-liability limited partnership available to shield general partners from liability, though these provisions were already codified prior to the 2007 adoption of the ULPA (2001).

Fiduciary duties
The new limited partnership act rules also specify and limit the fiduciary duties owed by general partners to the limited partnership. General partners owe a duty to account for and hold property derived from limited partnership’s activities as a trustee for the limited partnership. NRS 87A.385(2)(a). General partners must also refrain from self-dealing with and competing against the limited partnership in limited circumstances. NRS 87A.385(2)(b) and (c). The duty of care owed to the limited partnership is limited to refraining from negligent or reckless conduct, intentional conduct, or a knowing violation of the law. NRS 87A.385(3). The fiduciary duties of general partners were not explicitly defined under the pre-2007 limited partnership rules and were therefore left open to interpretation under the general partnership rules. General partners operating without the benefit of the new specified and limited fiduciary duties may likely owe a greater duty to their limited partners, one that requires as then-Judge Cardozo put it, “Not honesty alone, but the punctilio of an honor the most sensitive.” Meinhard v. Salmon, 164 N.E. 545 (1928).

Duration and dissolution
The new limited partnership rules also change the procedures for the duration and dissolution from the partnership. Whereas the original rules provide that the duration of the limited partnership is to be specified in the certificate of limited partnership, the new rules provide that a limited partnership shall continue as a perpetual entity. NRS 87A.155. The original limited partnership statute provides that a decision to dissolve the limited partnership requires the unanimous consent of all partners. NRS 88.550(3). The new statute provides that only the consent of all the general partners and those limited partners owning a majority of the rights to receive distributions as limited partners are needed to dissolve the partnership, essentially concentrating more power with the general partners. NRS 87A.435

Use of limited partner’s name
Under Chapter 88.320, the use of a limited partner’s name in the name of the limited partnership is disallowed except under certain circumstances. Under the new rules, a limited partnership may now use a limited partner’s name in the name of the limited partnership. NRS 87A.175.

Making a choice
Limited partnerships new and old need to make an informed decision regarding which limited partnership act will apply to the entity’s business. Generally, in the specialized circumstances in which a limited partnership is the chosen investment vehicle, the new rules found in Chapter 87A are more likely to be appropriate. Clients who formed a limited partnership before October 1, 2007 should take a long look at the potential benefits of opting-into the new statutory framework.

 
Jordan Pinjuv is an associate at Kummer Kaempfer Bonner Renshaw & Ferrario where he focuses on corporate and securities laws and transactions. He can be reached at jpinjuv@kkbrf.com.

Christopher L. Kaempfer, Thomas D. Amick and Kathleen M. Drakulich were featured in the “Eye on Alumni” online publication by the University of the Pacific McGeorge School of Law for being named Best Lawyers in America.

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By Beau Bennett and Thomas Armstrong

Published in the Business Law Guide, October 2008

When the economy is strong and business is zooming along, it’s the exception rather than the rule when a company or individual is required to take action against a delinquent tenant or pursue collection of past due rents or monies owed them.

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By Andrew Moore

Published in Nevada Gaming Lawyer, September 2008

Introduction: The Casino Entertainment Tax - The Precursor to Nevada’s Live Entertainment Tax

Many tourist destination attempt to increase interest by labeling themselves with an interesting moniker or by creating an interesting and kitschy attraction. Mitchell, South Dakota is famous for its Corn Palace, . . .

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By Stephanie Allen

Published in the August 2008 edition of The Nevada Lawyer

"As lawyers, it is our professional responsibility to serve the public through pro bono work and through legal organizations or associations such as the State Bar of Nevada."

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By Leslie Godfrey

 

 

Published in the August 2008 edition of Communiqué, the official publication of the Clark County Bar Association

 Common interest communities or homeowners associations have become increasingly popular as Nevada’s population grows. They are designed with the goal of organizing a neighborhood community and preserving property values. Municipal governments have taken advantage of these organizations, handing over the significant responsibility of maintaining and repairing the community infrastructure. This often includes security lighting and gates, sewer, road and sidewalk paving, landscaping, fencing, block walls, and other vital components of a neighborhood. Many communities have fallen short of the necessary funds to uphold this responsibility, and as a result, Nevada Revised Statutes Chapter 116 (Chapter 116) was amended in 2005 to regulate how a community funds its infrastructure improvement and repair reserve.

 

Mandatory funding required

Since 2005, common interest communities have been required to obtain a reserve study to project the repair, replacement and restoration costs of the major components of the community’s common elements. NRS 116.31152(1). Further, Chapter 116 places an affirmative obligation upon common interest communities to calculate and levy assessments necessary to fund the reserve. The community may adopt a funding plan “that is designed to allocate the costs for repair, replacement and restoration of the major components of the common elements over a period of years if the funding plan is designed in an actuarially sound manner which will ensure that sufficient money is available when the repair, replacement, and restoration of the major components of the common elements are necessary.” NRS 116.3115(2).

 

Statutory conflict with a community’s governing documents

Conflict arises when a community’s governing documents effectively prevent the funding of the reserve plans. One specific example includes a community in which the governing documents provided that the Board of Directors must obtain two-thirds majority approval of homeowners before the homeowner assessment may be increased by more than 10 percent in any given year. Further, the same governing documents provided that “any special assessment for capital improvements to the common elements must be voted on by membership.” This language became a problem for one community when the reserve required a greater than 10% increase in the community’s assessment, and the community could not obtain approval of two-thirds of the homeowners.

 

The legislature likely intended to resolve this problem when it enacted NRS 116.1206. It states that “any provision contained in a declaration, bylaw or other governing document of a common-interest community that violates the provisions of this chapter shall be deemed to conform with those provisions by operation of law, and any such declaration, bylaw or other governing document is not required to be amended to conform to those provisions.” NRS 116.1206. In addition, the Bureau of the Legislative Counsel issued a letter in 2007 confirming the legislature’s intent. In that letter, the Bureau states:

 

An association has the mandatory statutory duty to fund adequately its reserves, to include in its annual budget a statement concerning its reserves and whether it will be necessary to impose any special assessments and to review its study of the reserves on an annual basis. . . . Any provision in the governing documents of a common interest community that conflicts with a statute is illegal, invalid, unenforceable and void and is deemed by operation of law to conform to the superseding statutory requirement. . . . The executive board of an association may, without an affirmative vote of the units’ owners, impose an assessment to fund the reserves of the association despite the fact that the governing documents of the association require an affirmative vote of the units’ owners to impose such an assessment.

 

The Bureau relied on several major principles of statutory construction in arriving at its conclusion. First, the Bureau examined the plain language of the statute. Moore v. State, 117 Nev. 659, 661 (2001) (citing Anthony Lee R., a minor v. State, 113 Nev. 1406, 1414 (1997). “When a statute is clear and unambiguous, we must apply the plain and ordinary meaning of the language as written, unless such a meaning violates the spirit of the act or leads to an absurd or unreasonable result.” The Bureau notes that NRS 116.3115 specifically states that a community “shall establish adequate reserves . . . .” “The term ‘shall’ imposes a duty to act and is construed as mandatory unless the statute demands a different construction.” Ewing v. Fahey, 86 Nev. 604, 607 (1970). See also NRS 0.025(1)(d). The Bureau thus concluded that associations are mandated by the plain language of the statute to fund a reserve. The Bureau also noted that NRS 116.1206 “implicitly recognizes that when a conflict arises” between a provision of a community’s governing documents and a statutory provision, “the statutory provision controls.” Accordingly, the plain language of these statutes clearly demonstrates that the legislature intends to allow an association to levy special assessments to fund adequate reserves even if the association’s governing documents require a two-thirds majority vote.

 

Further, the Bureau reasoned that to construe the effect of these statutes otherwise would create a senseless result. “A statute should always be construed to avoid absurd results.” General Motors v. Jackson, 111 Nev. 1026, 1029 (1995); “A statute must be read in light of what is reasonable and not merely what is conceivable.” Ebarb v. State, Dep’t of Motor Vehicles and Public Saftey, 107 Nev. 985, 987 (1991); The Bureau states: “If the legislative mandate to fund a reserve was interpreted to be subordinate to the requirements contained in the governing documents of [an association] . . . the goals and purposes for which the statute was enacted would be rendered wholly nugatory if the units’ owners refused to vote in favor of the assessment.” If the statute were interpreted allowing homeowners to vote down additional assessments necessary to fund a reserve, that interpretation would defeat, rather than promote the statutes’ purpose and would therefore constitute an unreasonable and absurd result.

 

Opponents’ argument

Nonetheless, homeowners resisting an assessment increase have successfully argued that NRS 116.3115(2) is silent as to whether a community is required to allow their homeowners to vote, and therefore, the mandate to fund a reserve and an association’s voting requirement are not mutually exclusive. Arbitrator Dee Newell for the Office of the Ombudsman for Common Interest Communities ruled in July 2007 that “[c]lear and concise language [of the statute] does not extend to a particular method or plan that must be used to establish ‘adequate reserves.’ That is…, the Statutes do not deny other means (than the Board’s Special Assessment) to adequately fund the legally mandated monetary reserve. There simply is no language on how such reserves are to be funded.” See the Decision of Arbitrator Dee Newell, In Re: NRED Control No. 7-60. The Arbitrator pointed out that each relevant statute refers to the “Association” in mandating adequate reserves. She reasoned that homeowners comprise the “Association” and accordingly, they “should have some type of input in rendering adequate reserve plans.” An association’s executive board must work in tandem with the homeowners in rendering a method to comply with statutes requiring reserve funding, while at the same time meeting the voting requirements of the community’s governing documents.

 

This decision places common interest communities in a very awkward position. Essentially, if an increase greater than 10 percent is necessary in any given year to fund the reserve and the Board of Directors cannot obtain a two-thirds majority approval of homeowners, then it cannot properly fund its reserve. In addition to the risk associated with obvious safety risks of failing infrastructure, the Board of Directors are open to statutory repercussions for a failure to fund the reserve. Specifically, a fine may be levied against the association for failure to adequately fund the reserve. NRS 116.785(c). Ironically, such a fine would be paid through the homeowner assessment, which may require an increase of 10 percent or more. This begs the question: could the homeowners simply refuse to give a two-thirds majority approval to pay the state fine?

 

Arbitrator Newell clarified her opinion in Memorandum of Clarification dated August 14, 2007. Instead of requiring a full two-thirds majority as required by the association’s governing documents, she modified her opinion holding that the Association was only required to obtain a two-thirds majority of those homeowners who actually cast a vote. While this provides equitable assistance to an association attempting to obtain enough votes to fund their reserve, it highlights the impossible conundrum entwining Chapter 116 and voting requirements in communities’ governing documents.

 

Statutory amendment and veto

Assembly Bill 396 was introduced during 2007’s 74^th Legislative Session. The bill included language amending NRS 116.3115(2) to directly invalidate any voting provision in an association’s governing documents that would impede the funding of a reserve. See Assembly Bill 396 First Conference Committee Amendment CA19, § 22(b).

 

However, AB 396 was vetoed by Governor Jim Gibbons. In his June 15, 2007 letter to the Secretary of State, the Governor states “[s]ome aspects of this bill represent good public policy. Other aspects, however, could have unintended and unanticipated impacts . . . including the possibility of increased assessments and the possibility of dramatic changes to common-areas without an opportunity for homeowners to participate.”

 

Current practice recommendations

Practically speaking, the present state of the law obliges common interest communities to fund their reserve while upholding any voting requirements within their governing documents. If the reserve requires a significant increase in the homeowner assessments, the Board of Directors must engage in a campaign to educate their homeowners. Then the Board of Directors must convince the homeowners that their method of funding the reserve is appropriate. An attorney advising an association under the current state of the law should assist the association in clearly defining for the homeowners the statutory responsibility to fund the reserve, the process of assessing the condition and lifespan of the community infrastructure, the necessary financial investment to properly fund the reserve, and the possible repercussions if the reserve is not funded. If a two-thirds majority approval is not obtained, the Board should provide different options to their homeowners.

 

However, changes to Chapter 116 addressing this conflict are expected in the next legislative session. Hopefully, new law will set forth clear procedures to balance homeowners’ input with the community’s responsibility to preserve community infrastructure in good condition.

 

Leslie Godfrey is an associate with the law firm of Kummer Kaempfer Bonner Renshaw & Ferrario. Ms. Godfrey practices primarily in the area of business and commercial litigation.

 By Jim Smyth

 

Published in the August 2008 edition of Communiqué, the official publication of the Clark County Bar Association

 

One of the enjoyable parts of representing commercial landlords is that the eviction remedies available in NRS 40.253 and 40.300 actually work to quickly achieve the results that are desired by landlords. That is not the case in too many other areas of civil litigation. Unfortunately, however, the landlord-tenant provisions of NRS Chapter 40 contain somewhat archaic terminology that can be confusing. That confusion can lead to procedural defenses that slow down the eviction process and lead to frustrated and disappointed clients. The purpose of this article is to clarify some of the commonly confused commercial landlord-tenant issues. (Residential landlord-tenant issues are mainly covered in NRS Chapter 118A and will not be discussed in this article). 

 

The relationship between the lease and chapter 40 remedies

The terms of the lease govern and control the rights and remedies of a landlord and tenant. See Anvui, LLC v. G.L. Dragon, LLC, 123 Nev. 25, 163 P.3d 405 (2007)(holding ambiguity in underlying lease terms created legal defense to summary eviction). The only time the provisions of NRS Chapter 40 come into play is when a landlord desires to evict a tenant. In those cases, a landlord must utilize and follow the procedures in NRS Chapter 40. See Gasser v. Jet Craft, Ltd., 87 Nev. 376, 487 P.2d 346 (1971)(service of proper notice is jurisdictional requirement for eviction for failure to pay rent under NRS Chapter 40). It is not improper for a landlord to first send the notice required under the default provisions of the lease prior to serving the NRS Chapter 40 notices that are required to start the eviction process. Lorenz v. Beltio, Ltd., 114 Nev. 795, 963 P.2d 488 (1998)(note also that NRS 40.252 prohibits terms in leases that shorten the notice periods specified in NRS Chapter 40).

 

The two most common types of notices

NRS Chapter 40 provides several different types of notices that are utilized based upon the nature of the particular lease default or dispute. However, the majority of commercial landlord-tenant matters are either defaults in the payment of rent (NRS 40.2512) or failures to perform conditions of the lease (NRS 40.2516).  

 

Summary eviction and unlawful detainer

There are two separate eviction remedies. The first, which is only available where the default is the failure to pay rent, is the summary eviction remedy provided in NRS 40.253. The other eviction remedy, utilized for all other defaults, is the verified complaint for unlawful detainer and writ of restitution provided in NRS 40.300.

 

Distinction between monetary defaults and defaults in the payment of rent

Not every monetary default is a failure to pay rent. For example, the monetary default may be for failure to pay common area maintenance charges or taxes. Such items may constitute rent only if the underlying lease provides that such charges and costs are additional rental. Friedman on Leases § 5:1.1, (2006)(internal citation omitted).  This is an important distinction because the summary eviction remedy is not available where default is a monetary default that would not constitute the failure to pay “rent”. See 118.090 (defines “rent”) and NRS 40.253(9) (distinguishes rent from “collection fees, attorney’s fees or other costs other than rent….”). If the monetary default is not a failure to pay rent, the appropriate remedy is the unlawful detainer remedy specified in NRS 40.300.

 

Claims for contract damages for post-eviction rent

NRS 40.253, the statute providing the supplemental remedy of summary eviction, does not discuss whether an order for summary eviction releases the tenant from claims for contract damages for post-eviction rent. Nevertheless, some attorneys argue that an eviction does release a tenant from liability for such damages. They argue that their position is supported by the Supreme Court of Nevada’s dicta statement in Lynn v. Ingalls, 100 Nev. 115, 676 P.2d 797 (1984), that a landlord may “elect to declare the lease terminated and seek an unlawful detainer action to oust the defaulting tenant. See NRS 40.253.” They also point to NRS 40.360(1), which provides that a judgment for unlawful detainer “shall also declare the forfeiture of such lease or agreement.”

 

Unfortunately, the Supreme Court of Nevada has not determined whether a landlord that obtains a summary eviction pursuant to NRS 40.253 or a judgment for restitution pursuant to NRS 40.360(1) loses its claim against the tenant for contract damages for post-eviction rent. Courts are now less unfriendly to the idea of enforcing savings clauses that reserve the rights of a landlord to contract damages for post-eviction rent. See Friedman on Leases, § 16:3.3 (2006); Hi Kai Investment, Ltd. v. Aloha Futons, Beds & Waterbeds, Inc., 929 P.2d 88 (Haw.1996); and Circuit City Stores, Inc. v. Rockville Pike Joint Venture Limited Partnership, 829 A.2d 976 (Md.2003). Therefore, if there is a well-drafted savings clause in the lease, the landlord has a strong argument that it is entitled to contract damages for post-eviction rent. Nevertheless, the landlord should understand this issue prior to utilizing the NRS Chapter 40 eviction remedies.

 

Five-day notice to pay rent or quit jurisdiction

If the default is a default in the payment of rent, the notice must conform to the requirements of NRS 40.253(3). A link to a good sample Five-Day Notice to Pay Rent or Quit may be found on the Las Vegas Township Justice Court website, http://www.clarkcountycourts.us/lvjc/court-forms.html.  NRS 4.370(1)(g) provides that the jurisdiction of the justice courts is limited to those landlord-tenant matters where the damages claimed are less than $10,000.00. Therefore, if the amount of delinquent rent is in excess of $10,000.00, the district court would have jurisdiction. Keep in mind, however, that most commercial landlord-tenant matters will exceed $10,000.00 and, therefore, will be within the jurisdiction of the district court.

 

Five-day notice to perform covenant or surrender

NRS 40.2516 provides that a tenant is guilty of an unlawful detainer if it remains in possession after it receives and fails for five days after service to comply with a written notice requiring the performance of a condition or covenant of the lease. The statute does not contain a form, but it does specify the required language. In common practice, the NRS 40.2516 notice looks much the same as the NRS 40.2512 Five-Day Notice to Pay Rent or Quit. One important distinction is that the Five-Day Notice to Perform Covenant or Surrender will not specify that the tenant may file a response in the court. There is no need for such a response because the landlord is not entitled to seek a summary eviction under NRS 40.253 when the default is not for the failure to pay rent. Rather, if the tenant does not comply with the notice, the landlord will have to file a verified complaint for unlawful detainer and motion to seek a writ of restitution pursuant to NRS 40.300.

 

Service of the notice on the tenant, subtenants, and any guarantors

The notice must be served in accordance with NRS 40.280. The notice should include proof of service (see the Five-Day Notice form referenced above) and should be served upon any guarantors of the lease in order to avoid their subsequent procedural defenses.

 

The tenant’s contesting affidavit

Pursuant to NRS 40.253(3), a tenant may file an affidavit “stating that he has tendered payment or is not in default in the payment of rent” with the court having jurisdiction over the matter. If the tenant files an affidavit contesting the Five-Day Pay or Quit Notice, the court shall, after service of notice upon both parties, hold a hearing “to determine the truthfulness and sufficiency” of the affidavit. If the court determines there is no legal defense, it may issue a summary order for removal of the tenant or an order providing the nonadmittance of the tenant.” NRS 40.253(6). If the court does find there is a legal defense, the request for summary eviction will be denied, but the landlord may continue with an action for unlawful detainer. NRS 40.253(6).

 

Affidavit of complaint for summary eviction

If the tenant does not file a contesting affidavit or comply with the Five-Day Pay or Quit Notice, the landlord will then file an Affidavit of Complaint for Summary Eviction. The requirements for the form of affidavit of complaint are set forth in NRS 40.253(5). Generally, the form must set forth specific information such as the term of the lease, the delinquent amount, the length of time the tenant has gone without paying, and the amount of rent claimed. NRS 40.253(5). A sample affidavit of complaint for summary eviction can be found on the Las Vegas Township Justice Court website, http://www.clarkcountycourts.us/lvjc/court-forms.html (but keep in mind the jurisdictional issues discussed above). Also, the landlord will include claims for post-eviction damages.

 

When they are understood, the eviction remedies contained in NRS 40.253 and 40.300 may be utilized to help landlords quickly achieve desired results. Those quick results will help you enjoy representing commercial landlords.

 

Jim Smyth is a partner at Kummer Kaempfer Bonner Renshaw and Ferrario practicing in the areas of construction, commercial litigation and landlord-tenant law. He may be reached via email at jsmyth@kkbrf.com or via telephone at (702) 792-7000.

U.S. Supreme Court Case Update

By: Elizabeth M. Sorokac

 

Published in the April edition of  Communiqué, the publication of the Clark County Bar Association.

This article summarizes a handful of the cases heard by the United States Supreme Court in the last year. As is always the case, the Supreme Court has heard a wide variety of cases ranging from age discrimination matters to jurisdictional appeals.

Statutory notice of appeal time frames are jurisdictional and cannot be waived Bowles v. Russell, 551 U.S. ____ (2007).

Procedural Posture
The petitioner failed to file a timely notice of appeal from the federal district court’s denial of his petition for habeas corpus and moved to reopen the time period for filing an appeal under Federal Rule of Appellate Procedure 4(a)(6). FRAP 4 implemented 28 U.S.C. §2107 and, in particular, FRAP 4(a)(6) allows the district court to extend the time period for filing an appeal for 14 days from the day the district court grants the order to reopen. The reopening of the appeal period is predicated on the satisfaction of the following conditions set forth in FRAP 4(a)(6): (A) the motion is filed within 180 days of the judgment or order is entered or within 7 days after the moving party receives notice of entry of order, whichever is earlier; (B) the court finds the movant was entitled to notice of entry of the judgment or order and did not received notice from the district court or from any other party within 21 days of entry; and (C) the court finds no party would be prejudiced.

The district court granted petitioner’s motion under FRAP 4(a)(6), however, the district court’s order incorrectly gave petitioner 17 days to file an appeal. Petitioner filed his notice of appeal within the 17 day period set forth in the court’s order, but outside of the 14 day period set forth in FRAP 4(a)(6) and §2107(c). The issue on certiorari is whether the Court of Appeals lacked jurisdiction to hear the appeal filed outside of the period set forth in §2107(c), but within the time period set forth by the district court in its order.

Holding
In a 5-4 split decision, the majority held “that when an appeal has not been prosecuted in the manner directed, within the time limited by the acts of Congress, it must be dismissed for want of jurisdiction.” Bowles at 8. The holding is based on the fact that Congress decides whether the federal courts have jurisdiction to hear cases and it also has the power to decide when and under what conditions federal courts hear cases. Petitioner’s failure to file his notice of appeal within the time period set forth by the congressionally enacted statute divested the Court of Appeals of jurisdiction and the Court of Appeals correctly held that it did not have jurisdiction to hear the appeal.

An appellate court should not presume the lower court reached an incorrect legal conclusion, nor should it substitute its judgment for the lower court’s regarding evidence admissibility Sprint/United Management Co. v. Mendelsohn, 552 U.S.____ (2008).

Procedural Posture
In an Age Discrimination in Employment Act of 1967 (ADEA) case, Respondent sought to use the testimony of five former Sprint employees to support her claims. Not one of the former employees was part of respondent’s working group, nor had any of them worked under respondent’s supervisors while employed at Sprint. Sprint filed a motion in limine to exclude the testimony of the former employees and the district court, through a minute order, excluded evidence of “discrimination against employees not similarly situated to plaintiff” (here, respondent). Sprint at 3. The district court’s order provided no explanation as to the basis for its ruling.

The Court of Appeals treated the minute order as the application of a per se rule that evidence from employees with other supervisors is irrelevant to proving an ADEA claim and the District Court abused its discretion for relying on Aramburu v. Boeing Co., 112 F. 3d 1398 (10th Cir. 1997). The Court of Appeals based the District Court’s abuse of discretion on its misapplication of the rule in Aramburu to this case because Aramburu addressed discriminatory discipline and not a company-wide policy of discrimination as alleged here. The Court of Appeals then determined the evidence was relevant and not unduly prejudicial under the Rules of Federal Evidence and reversed and remanded the case to the district court for a new trial. The issue on certiorari is whether, in an ADEA claim, the Federal Rules of Evidence permit the testimony of employees “alleging discrimination by persons who played no role in the adverse employment decision challenged by plaintiff.” Sprint at 4.

Holding
In a unanimous decision, the Court vacated the decision of the Court of Appeals and remanded the case back to the district court to clarify its evidentiary findings under the applicable Rules of Federal Evidence. Where the basis for a district court’s ruling is ambiguous (the district court’s order failed to indicate the basis for its ruling to exclude the evidence), the Court of Appeals should remand the matter to the district court for clarification. The appellate court should not presume the lower court reached an improper legal conclusion as it did when it presumed the lower court wrongly applied Aramburu. Further, the Court of Appeals improperly weighed factors of relevance and prejudice related to the admissibility of evidence which are for the district court to determine in the first instance. Sprint at 7, citing United States v. Abel, 469 U.S. 45, 54 (1984).

An ADEA charge must meet the elements of 29 C.F.R. §1626.6 and must request EEOC action Federal Express Corp. v. Holowecki et al., 552 U.S. ____ (2008).

Procedural Posture
One should note the following case applies only to matters filed under the Age Discrimination in Employment Act of 1967 (ADEA) with the Equal Employment Opportunity Commission (EEOC). The statutory waiting periods and enforcement mechanisms for other statutes the EEOC enforces differs from ADEA claims.

The ADEA requires that “no civil action…be commenced…until 60 days after a charge alleging unlawful discrimination has been filed with the Equal Employment Opportunity Commission.” 29 U.S.C. §626(d). The statute does not define the term “charge,”. In December 2001, respondent filed an Intake Questionnaire with the EEOC and a detailed six page affidavit supporting her claims that FedEx’s programs were discriminatory against older couriers. In April 2002, respondent and others filed an ADEA suit in district court against petitioner claiming their programs were attempts to eliminate older couriers. Petitioner filed a motion to dismiss based on the contention that respondent failed to file a charge with the EEOC at least 60 days prior to filing suit as required by 29 U.S.C. §626(d). The District Court granted the motion and dismissed the case and the Second Circuit reversed. The issues on certiorari are what the definition of the term charge is and whether the respondent’s Intake Questionnaire and accompanying affidavit constitute a charge.

Holding
In a 7-2 decision, the majority affirmed the judgment of the Court of Appeals. The Court defined a charge to be a writing that names the respondent and generally alleges the discriminatory act (using the elements of 29 C.F.R. §1626.6) and the filing with the EEOC, when taken as a whole, “should be construed as a request by the employee for the agency to take whatever action is necessary to vindicate their rights” (using the EEOC’s policies). Federal Express at 6. The Court left the responsibility to formulate clearer forms and processes to reduce future misunderstandings regarding whether a document is a charge, as defined, to the EEOC.

The question of whether the respondent’s filing meets the “request to act” test is a reasonable exercise of the EEOC’s authority to apply its own regulations in the routine administration of the statute it enforces. The respondent’s Intake Questionnaire contained all of the requirements of the more inclusive 29 C.F.R. §1626.8(a) (the name, address and telephone number of the person making the charge and the charged entity; a description of the discriminatory act; the number of employees of the charged employer; and a statement indicating whether the charging party has initiated state proceedings) and gave the EEOC consent to disclose her identity to her employer. The respondent’s affidavit accompanying the Intake Questionnaire asked the EEOC to “please force Federal Express to end their age discrimination plan so we can finish out our careers absent the unfairness and hostile work environment created within their application of Best Practice/High Velocity Culture Change.” Federal Express as 14. The Court agreed with the EEOC’s determination that these three things taken together satisfy the requirements of a charge.

The statute of limitations in the Court of Claims is an absolute bar to claims John R. Sand & Gravel Co. v. United States, 522 U.S. ____ (2008).

Procedural Posture
Petitioner filed an action in the Federal Court of Claims in May 2002 asserting that various Environmental Protection Agency activities on the land amounted to an unconstitutional taking of their leasehold rights. The statute of limitation states “every claim of which the United States Court of Federal Claims has jurisdiction shall be barred unless the petition thereon is filed within six years after such claim accrues.” 28 U.S.C. §2501. The government initially challenged the timeliness of the claim, but then waived the challenge by conceding that certain claims were timely. The government won on the merits of the case and petitioner appealed the judgment to the Court of Appeals for the Federal Circuit. The Court of Appeals considered the timeliness of the petitioner’s claim sua sponte and held the action was untimely. The issue on appeal is whether the Court of Appeals can ignore a party’s waiver of the statute of limitations affirmative defense and consider the timeliness of a claim sua sponte.

Holding
In a 6-3 decision (with Justice Ginsburg dissenting separately), the majority affirmed the judgment of the Court of Appeals. Statutes of limitation that facilitate the administration of claims or promote judicial efficiency are more absolute and require the court to decide “the timeliness question despite a party’s waiver or as forbidding a court to consider whether certain equitable considerations warrant extending a limitations period.” John R. Sand & Gravel at 3. The court of claims statute of limitation falls into this category and the Court upheld its long standing interpretation (dating from 1883) that the court of claims statute of limitation is an absolute limitation on claims that the court must consider.

Ms. Sorokac is an attorney with the law firm of Kummer Kaempfer Bonner Renshaw & Ferrario in the firm’s government affairs department. She has been practicing in Las Vegas for more than six years and specializes in zoning and land use matters before the local jurisdictions, including
Clark County, the City of Las Vegas, the City of Henderson, Nye County and the Town of Pahrump. Ms. Sorokac can be reached at (702) 792-7000 or by email at esorokac@kkbrf.com.

 Parallel Paths to Accomplishment
By: Tabitha Fiddyment and Stephanie Allen

 

Published in the May edition of  Communiqué, the publication of the Clark County Bar Association.

Congratulations to the William S. Boyd School of Law on ten successful years. The last ten years may seem to many of us like a lifetime, but it has really been no time at all for the law school. We remember our decision to attend Boyd and the enthusiasm surrounding the opening of the school. Now, ten years later, we find ourselves examining our professional lives and comparing how the professional accomplishments of ours have paralleled the law school’s success over that same ten year period. We are grateful for many things in our lives and in our careers. It is only appropriate to thank the law school, and the community that invested in the law school, for also investing in us.

A lifetime for us and ten short years for the law school
Ten years ago, when the law school first opened its doors, we were juniors in college at the University of Nevada, Reno. We had already decided that law school was the next step in our academic careers, but we had not yet identified our school of choice. Then, just barely twenty-one years of age, the next ten years of our lives would ultimately shape our future. We went from young college students struggling to make ends meet to young professionals struggling to pay off student loans. We would take the bar exam, we would get married, we would buy our own homes and we would become successful practicing lawyers. Those ten years seemed like a lifetime.

In those same ten years, Nevada’s only law school opened its doors at a temporary facility in the former Paradise Elementary School, built a notable law library, gained accreditation in its first five years, funded, built and relocated into a state-of-the-art facility on the main University of Nevada, Las Vegas campus, developed writing programs and dispute resolution clinics that are among the most reputable in the Country, received a U.S. News and World report ranking in the top one hundred law schools in the Nation and graduated over one thousand jurists.

See http://gradschools.usnews.rankingsandreviews.com/grad/law/search. 
Boyd’s accomplishments in ten short years are incredible. What seemed like a lifetime to us was record time for the Boyd School of Law.

A leap of faith for us and contagious enthusiasm for Boyd
Looking back, when we chose Boyd for our legal education, we took a leap of faith on a new and unaccredited law school. In fact, the American Bar Association’s suggested top consideration for choosing a law school is that it be ABA-Accredited.

See http://www.abanet.org/child/choosinglawschool.pdf.  Virtually every state requires graduation from an ABA-Accredited law school in order to sit for the bar exam.

See http://www.abanet.org/child/choosinglawschool.pdf.  We understood this risk, but we were committed to Nevada, and we believed that the law school would succeed.  The enthusiasm surrounding the law school was contagious. Everyone with whom we discussed the law school had no doubt it would be a success. The founding Dean, Richard Morgan, traveled the state advocating for the school and its ability to graduate talented, capable jurists invested in Nevada. Similarly, Nevada lawyers and judges were excited by the thought of working with and training local graduates. They believed in the depth of knowledge it would add to the legal community, and they welcomed a new perspective. Business owners and executives alike were anxious for another post graduate academic institution that would help attract quality individuals to Nevada. They too promised their support and encouraged us to attend Boyd. The community as a whole was committed to doing everything it took to establish a state-of-the-art school for Nevada. The financial backing was phenomenal. The professors were, and continue to be, top notch. The legal community was ready and willing to welcome the law school it never had. The last component was to attract quality students to the school. With all the factors in place, success for the law school was inevitable.

Examining how our professional lives have paralleled the law school’s success
We took that leap of faith and, on a hot August morning in 2000, we packed all of our combined belongings into a twenty-four foot long U-Haul and left our Northern Nevada families and friends in Reno and Carson City for Las Vegas. We were both encouraged by our parents, college professors, local prominent business people, judges and other lawyers in Nevada to attend the Boyd School of Law. It was impressed upon us that if we believed in our own abilities and in the potential of the Law School, our success was certain. We were leaving most of what we knew behind, but we had the support of lasting friendship that began at Carson High School, an investment in and connection to the State we grew up in, and the youthful hope of being part of something great.

The law school experience was humbling for both of us. Although we initially attended class in an elementary school setting, the lessons were profound and thought-provoking. We struggled with different aspects of the experience, but nonetheless, we grew as individuals, as future lawyers and as friends.

We are now senior associates at the statewide law firm of Kummer Kaempfer Bonner Renshaw & Ferrario and practice together with some of the most esteemed and well-regarded government affairs lawyers in Nevada. Building on the foundation provided by Boyd, we have developed reputations as specialists in the area of land use and zoning. We have had the opportunity to participate in some of the largest projects in the history of development in Las Vegas.

In addition to our land use and zoning practice, we both serve the community, through active involvement in the State Bar and community organizations and through pro bono service.  Today, the law school’s accomplishments have been recognized not just locally but nationally. The law school became fully accredited within five years and became a member of the Association of American Law Schools shortly thereafter. The law school’s legal writing program is ranked third in the Nation. See Best Graduate Schools, (visited April 9, 2008) . 

See http://grad-schools.usnews.rankingsandreviews.com/grad/law/writing. The Saltman Center for Conflict Resolution is ranked ninth in the Nation. See Best Graduate Schools, (visited April 9, 2008) http://grad-schools.usnews.rankingsandreviews.com/grad/law/dispute.  The Wiener-Rodgers Law Library is the biggest in the state and has over 300,000 volumes or volume equivalents. See http://www.law.unlv.edu/library.html. The faculty comes from all over the country with stellar reputations and credentials.

In addition, the law school maintains a curriculum that requires all first-year law students to “participate in a Community Service Program and spend substantial time providing legal information to people in the community that do not have access to lawyers. In partnership with Clark County Legal Services and the Clark County Pro Bono Project, law students prepare and present workshops at numerous locations in our community, on basic legal matters such as small claims court procedure, family law and procedure, bankruptcy, guardianship and paternity/custody matters.”  

See http://en.wikipedia.org/wiki/William_S._Boyd_School_of_Law citing Richard Morgan, Public/Private Partnerships Are Not The Only Kind of Important Collaboration; There Is Another Significant Sort Of Partnership-That I Will Refer to As A “Public/Public Partnership”-From Which The Boyd School Of Law Has Benefited Greatly, Nev. Law, Feb. 2006, at 28.

The speed with which the law school obtained accreditation and accomplished all of this is remarkable and has been matched by few other law schools. In just ten short years, the law school has met and exceeded everyone’s expectations.

We are grateful to the law school
We are grateful for those who believed in and financially supported the law school. We value the incredibly talented law school faculty who have spent, and continue to spend, tireless and sometimes thankless hours focused on the law school’s success and on the success of its students. In just ten short years, the Boyd School of Law has become a deep-seated and highly respected part of the Nevada legal community. We are proud to be alumni of the Boyd School of Law and are grateful to the law school for providing us with the necessary tools to succeed. We have been fortunate to share a parallel path to accomplishment with the law school.

Tabitha Fiddyment and Stephanie Allen have been friends for nearly twenty years. They graduated high school together. They went to the University of Nevada, Reno together. They attended law school together, and they are now both senior associates in the Land Use & Government Affairs Department of Kummer, Kaempfer, Bonner, Renshaw & Ferrario. They did not marry the same man.