Nevada Appellate Court Summaries 10-5-20

By Joe Tommasino, Esq.

Supreme Court of Nevada

Attorney’s Fees:  (1) Generally, attorney fees must be awarded under a statute, rule, or contract authorizing the award; (2) the substantial-benefit doctrine provides an exception to this rule in shareholder-derivative actions, allowing successful shareholder plaintiffs who confer a substantial benefit on all shareholders of the defendant corporation to recover attorney fees in appropriate cases; and (3) here, appellants’ claim for attorney fees is a cognizable, independent claim, but the district court properly dismissed the claim because predicate litigation is necessary to obtain relief under the substantial-benefit doctrine and predicate litigation was absent.  The judicially created substantial-benefit doctrine is an exception to the American rule and allows recovery of attorney fees when a successful party confers a substantial benefit on the members of an ascertainable class, and where the court’s jurisdiction over the subject matter of the suit makes possible an award that will operate to spread the costs proportionately among them.  To recover an award of attorney fees under the doctrine, a party must demonstrate that (1) the class of beneficiaries is small in number and easily identifiable; (2) the benefit can be traced with some accuracy; and (3) the costs can be shifted with some exactitude to those benefiting.  Additionally, to qualify for the substantial-benefit exception to the American rule, “the prevailing party must show that the losing party has received a benefit from the litigation.”  The substantial-benefit exception is appropriate in shareholder actions where “the successful shareholder plaintiff confers a benefit on all shareholders of the defendant corporation.”  Here, the Supreme Court of Nevada adopted the “no suit, no fee” approach which is supported by public policy.  When a party files a shareholder derivative lawsuit, the complaint must set out the party’s efforts, or reasons for a lack of effort, to obtain the action the party desires.  The purpose of encouraging shareholders to make their demands before filing a complaint is to give the corporation an opportunity to correct any alleged mistakes on its own accord without judicial intervention.  Permitting fees without predicate litigation hinders that purpose by exposing the corporation to fees and potential litigation regarding those fees when receiving a demand letter, regardless of whether the corporation corrects the mistakes alleged in the demand.  Permitting fees without predicate litigation also encourages “strike suits,” where shareholders demand certain actions from the corporation via a derivative lawsuit and corporations are encouraged to settle quickly in order to avoid the potential expense of attorney fees.  And permitting fees under the substantial-benefit doctrine absent predicate litigation would disincentivize corporations’ directors from correcting mistakes based on pre-litigation shareholder demands, as doing so may instantly open the corporations up to costly fees.  Jesseph v. Digital Ally, Inc., 136 Nev. Adv. Op. No. 59, ___ P.3d ___ (September 17, 2020).  https://nvcourts.gov/Supreme/Decisions/Advance_Opinions/

Confrontation Clause: (1) Under Bruton v. United States, 391 U.S. 123, 135-36 (1968), the admission of a nontestifying codefendant’s inculpatory statement that expressly implicates the defendant violates the Confrontation Clause; and (2) here, appellant waived the Bruton challenge because he cooperated to redact statements, agreed to the redacted statements’ admission, indicated an intent to no longer pursue the Bruton challenge, and failed to thereafter object to the statements and thus showed a lack of intention to preserve the argument for appeal.  Where the defendant moves to sever trial on Bruton grounds but the district court determines that the statements can be sufficiently redacted, the defendant does not necessarily waive the Bruton challenge by thereafter participating in the efforts to redact the statements. Nevertheless, to clearly preserve a Bruton challenge for appellate review, a defendant must formally object, on the record, after the parties have agreed upon redactions and prior to the district court’s admission of a codefendant’s statement.  Determining whether a defendant preserves a Bruton argument for appeal is a highly fact-based inquiry requiring consideration of the totality of the circumstances.  Turner (Steven) v. State, 136 Nev. Adv. Op. No. 62, ___ P.3d ___ (October 1, 2020).  https://nvcourts.gov/Supreme/Decisions/Advance_Opinions/

Criminal procedure:  (1) NRS 175.101 provides that the trial judge must preside over post-trial motions unless the trial judge is absent, deceased, sick, or disabled; and (2) “disability” under NRS 175.101 contemplates some type of impairment—physical, mental, or otherwise—that prevents the trial judge from performing his or her duties.  The plain language of NRS 175.101 states that a trial judge’s “sickness or other disability” must render him or her “unable to perform the duties to be performed by the court . . . .” (Emphasis added.)  A “disability” is “[t]he inability to perform some function” or “[a]n objectively measurable condition of impairment, physical or mental, [especially] one that prevents a person from engaging in meaningful work.”  A trial judge’s inability to remember a particular event that occurred during a trial does not impair his ability to perform his duties by considering and deciding motions.  At Footnote 6, the Court reminded the district court that a trial judge has a duty to give further instructions to the jury when a jury question suggests a lack of understanding about a significant element of the applicable law.  When this occurs, the defendant “has the right to have his or her attorney present to provide input in crafting the court’s response to a jury’s inquiry.”  Harvey (Alfred) v. State C/W 75911, 136 Nev. Adv. Op. No. 61, ___ P.3d ___ (October 1, 2020). https://nvcourts.gov/Supreme/Decisions/Advance_Opinions/

Derivative actions:  A corporation, as a nominal defendant, is precluded from challenging the merits of a derivative action but may challenge a shareholder plaintiff’s standing in such action.  The Supreme Court of Nevada adopted the following factors set forth in Larson v. Dumke, 900 F.2d 1363, 1367 (9th Cir. 1990), for determining whether a shareholder plaintiff in a derivative action fairly and adequately represents the interests of the shareholders under NRCP 23.1:

            (1) Indications that the plaintiff is not the true party in interest;

(2) The plaintiff’s unfamiliarity with the litigation and unwillingness to learn about the suit;

(3) The degree of control exercised by the attorneys over the litigation;

(4) The degree of support received by the plaintiff from other shareholders;

(5) The lack of personal commitment to the action on the part of the representative plaintiff;

(6) The remedy sought by plaintiff in the derivative action;

(7) The relative magnitude of plaintiff’s personal interests as compared to his interest in the   derivative action itself; and

(8) Plaintiff’s vindictiveness toward the defendants.

Because these factors are intertwined, “it is frequently a combination of factors which leads a court to conclude that the plaintiff does not” adequately represent shareholders.  Cotter, Jr. v. Kane C/W 76981/77648/77733, 136 Nev. Adv. Op. No. 63, ___ P.3d ___ (October 1, 2020).  https://nvcourts.gov/Supreme/Decisions/Advance_Opinions/

Water: (1) Nevada has adopted the public-trust doctrine, which generally establishes that a state holds its navigable waterways in trust for the public; and (2) the public-trust doctrine as implemented through Nevada’s comprehensive water statutes does not permit the reallocation of water rights already adjudicated and settled under the doctrine of prior appropriation.  The public has an interest in the effective use of public-trust resources. This requires that allocations of water rights have certainty and finality so that rights holders may effectively direct water usage to its beneficial use, without undue uncertainty or waste.  Mineral Co. v. Lyon Co. (NRAP 5), 136 Nev. Adv. Op. No. 58, ___ P.3d ___ (September 17, 2020). https://nvcourts.gov/Supreme/Decisions/Advance_Opinions/

Nevada Court of Appeals

Habeas corpus:  (1) NRS 34.810(1)(a) requires a district court to dismiss a petition for a writ of habeas corpus challenging the validity of a judgment of conviction arising from a plea of guilty or guilty but mentally ill, unless it is based on allegations that the plea was not voluntarily and knowingly entered or it was entered without the effective assistance of counsel; (2) the plain language of the statute permits only ineffective-assistance claims that challenge the validity of the guilty plea; and (3) the statute excludes claims of ineffective assistance that do not allege a deficiency affecting the validity of the guilty plea, as well as claims that allege deficiencies that occur only after the entry of the guilty plea, such as those related to sentencing.  The scope of claims that may be raised in a postconviction petition challenging a conviction entered as a result of a guilty plea are limited to claims that challenge the validity of the guilty plea. These claims may be raised either directly, i.e., a claim asserting the plea was not voluntarily or knowingly entered, or indirectly, i.e., a claim asserting the plea was entered without the effective assistance of counsel.  Generally, to demonstrate ineffective assistance of counsel, a petitioner must show both that counsel’s performance was deficient in that it fell below an objective standard of reasonableness and that petitioner was prejudiced in that there was a reasonable probability of a different outcome absent counsel’s errors.  Because counsel must be effective during the plea-negotiation process, the test for deficiency focuses on the course of counsel’s legal action that preceded the plea to determine whether counsel’s advice, or failure to give advice, regarding the plea was within the range of competence demanded of attorneys in criminal cases.  Because the deficiency being evaluated is the advice rendered by counsel, claims relating to constitutional deprivations occurring prior to entry of the plea are only pertinent in the context of evaluating counsel’s advice. And when evaluating whether counsel’s advice was objectively reasonable, the court should look beyond the plea canvass to the entire record.  The “prejudice” requirement, on the other hand, focuses on whether counsel’s constitutionally ineffective performance affected the outcome of the plea process.  That is, it focuses on whether counsel’s deficient performance affected the petitioner’s acceptance or rejection of the guilty plea offer.  For example, where a petitioner claims that counsel’s improper advice “led him to accept a plea offer as opposed to proceeding to trial, the [petitioner] will have to show ‘a reasonable probability that, but for counsel’s errors, he would not have pleaded guilty and would have insisted on going to trial.”  Or where a petitioner claims that counsel’s improper advice led him or her to reject an earlier, more favorable plea offer, the petitioner will have to show a reasonable probability that “he would have accepted the offer to plead pursuant to the terms earlier proposed” and that, if it was within their discretion, neither the prosecution nor the trial court would have prevented the offer’s acceptance.  The familiar standard for whether a petitioner is entitled to an evidentiary hearing on an ineffective-assistance claim provides a useful framework for determining whether an ineffective-assistance claim is sufficiently pleaded to come within the scope of claims permitted by NRS 34.810(1)(a). To come within the scope, a petitioner must raise claims supported by specific factual allegations that are not belied by the record and, if true, would entitle him or her to relief.  Thus, a petitioner must allege specific facts demonstrating both that counsel’s advice (or failure to give advice) regarding the guilty plea was objectively unreasonable and that the deficiency affected the outcome of the plea-negotiation process.  Any claim that does not satisfy this standard is outside the scope of permitted claims and must be dismissed.  Because events occurring after the entry of the plea cannot have affected either counsel’s advice regarding entering the guilty plea or the outcome of the plea-negotiation process, ineffective-assistance claims relating to post-plea proceedings necessarily fall outside the scope of claims permitted by NRS 34.810(1)(a).  Gonzales (Melvin) v. State, 136 Nev. Adv. Op. No. 60, ___ P.3d ___ (October 1, 2020). https://nvcourts.gov/Supreme/Decisions/Advance_Opinions/

Resources

About the author: Joe Tommasino has served as Staff Attorney for the Las Vegas Justice Court since 1996. Joe is the President of the Nevada Association for Court Career Advancement (NACCA).

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