Watson Rounds, P.C. v. Eighth Judicial Dist. Court of State

358 P.3d 228

131 Nev. Adv. Op. 79

WATSON ROUNDS, P.C., Petitioner

v. The EIGHTH JUDICIAL DISTRICT COURT OF the STATE of Nevada, In and for the COUNTY OF CLARK; and the Honorable Elizabeth Goff Gonzalez, District Judge, RespondentsandHimelfarb & Associates, LLC, a Nevada Limited Liability Company; and Bruce Himelfarb, an individual, Real Parties in Interest.

No. 65632.

Supreme Court of Nevada.

Sept. 24, 2015.

Lemons, Grundy & Eisenberg and Robert L. Eisenberg, Reno, for Petitioner.

Kolesar & Leatham, Chtd., and Matthew T. Dushoff and Daniel S. Cereghino, Las Vegas, for Real Parties in Interest.

Before the Court En Banc.

OPINION

By the Court, PARRAGUIRRE, J.:

NRS 7.085 allows a district court to make an attorney personally liable for the attorney fees and costs an opponent incurs when the attorney “[f]ile [s], maintain[s] or defend[s] a civil action ... [that] is not well-grounded in fact or is not warranted by existing law or by [a good-faith] argument for changing the existing law.” Here we are asked to determine whether (1) Nevada Rule of Civil Procedure (NRCP) 11 supersedes NRS 7.085, and (2) the district court abused its discretion in sanctioning the law firm under NRS 7.085. We conclude NRCP 11 does not supersede NRS 7.085 because each represents a distinct, independent mechanism for sanctioning attorney misconduct. However, we also conclude the district court abused its discretion in sanctioning the petitioner under NRS 7.085 without making adequate findings. Accordingly, we grant petitioner's request for a writ of mandamus and direct the district court to vacate the portion of its order making petitioner liable for attorney fees and costs.

FACTS

FortuNet, Inc., is a gaming company that leases bingo equipment to casinos. In 2011, FortuNet filed the initial version of its complaint in an action against former FortuNet employees and an entity they created; the claims centered on allegations that the employees breached various duties to FortuNet and improperly used FortuNet's intellectual property. FortuNet later retained petitioner Watson Rounds, P.C. (Watson), as its new counsel, and Watson prepared a second amended complaint adding real parties in interest Bruce Himelfarb¹ and Himelfarb & Associates, LLC (collectively Himelfarb), as defendants. All claims against Himelfarb derived from an alleged kickback scheme and the alleged theft of FortuNet's intellectual property.

Each of FortuNet's claims against Himelfarb survived summary judgment. The parties proceeded to trial, but before the jury entered a verdict, the district court dismissed several of FortuNet's claims against Himelfarb for lack of evidence under NRCP 50(a). FortuNet also voluntarily dismissed several other claims against Himelfarb. The remaining claims against Himelfarb made it to the jury, which had the option of finding that Himelfarb was involved in the kickback scheme, the theft of FortuNet's intellectual property, both, or neither. The jury rejected FortuNet's claims against Himelfarb, found for Himelfarb on its counterclaims, and specifically asked the district court if it could include Himelfarb's attorney fees when calculating the damages Himelfarb suffered from FortuNet's breach of the implied covenant of good faith and fair dealing. The district court instructed the jury that it could not add attorney fees because such fees, if any, would be assessed posttrial.

The district court eventually determined that FortuNet would be liable for Himelfarb's attorney fees and costs in the amount of $551,216.83. Additionally, the district court determined Watson was jointly and severally liable with FortuNet for those fees and costs pursuant to NRS 7.085. The district court explained that Watson's liability was proper because, “despite not being well-grounded in fact and not warranted by existing law or a good faith argument for a change in existing law, [Watson] filed and maintained FortuNet's claims against [Himelfarb] and defended FortuNet against [Himelfarb's] counterclaims as contemplated by NRS 7.085.”

The district court sanctioned Watson under NRS 7.085 based on (1) “its review of the various pre-trial motions,” (2) “the evidence presented at trial,” (3) “NRCP 50(a) rulings,” (4) “FortuNet's voluntary dismissal with prejudice of certain claims,” (5) “the jury's unanimous verdict in favor of [Himelfarb],” and (6) “the jury's expressed desire to award [Himelfarb its] entire attorney's fees incurred relating to this case.” The district court also cited the fact that “the deposition and trial testimony of FortuNet's [CEO] and principal witness ... [stated] that counsel was responsible for '99.99%' of the factual and legal content of FortuNet's pleadings.”

Finally, the district court found that Watson “could not have made the required inquiries prior to filing” the second amended complaint against Himelfarb, “could not have reassessed the evidentiary support for FortuNet's claims against [Himelfarb]” before filing, and “could not have had a reasonable belief that the claims against [Himelfarb] were well-grounded in either fact or law.”

Watson now seeks a writ of mandamus vacating the portion of the district court's order making Watson jointly and severally liable for Himelfarb's attorney fees.

DISCUSSION

Watson contends that (1) this court should exercise its discretion to consider Watson's petition, (2) NRCP 11 supersedes NRS 7.085 such that the award against Watson is improper, and (3) the district court abused its discretion in making Watson liable for Himelfarb's attorney fees under NRS 7.085 without making adequate findings.

This court will exercise its discretion to consider Watson's petition

“Whether extraordinary writ relief will issue is solely within this court's discretion.” MountainView Hosp., Inc. v. Eighth Judicial Dist. Court, ––– Nev. ––––, 273 P.3d 861, 864 (2012). “Generally, an extraordinary writ may only be issued in cases ‘where there is not a plain, speedy and adequate remedy’ at law.” Id. (quoting NRS 34.170 and NRS 34.330 ). “The right ... to appeal in the future, after a final judgment is ultimately entered, will generally constitute an adequate and speedy legal remedy precluding writ relief.” D.R. Horton, Inc. v. Eighth Judicial Dist. Court, 123 Nev. 468, 474, 168 P.3d 731, 736 (2007).

Sanctioned attorneys do not have standing to appeal because they are not parties in the underlying action; therefore, extraordinary writs are a proper avenue for attorneys to seek review of sanctions. See Emerson v. Eighth Judicial Dist. Court, ––– Nev. ––––, 263 P.3d 224, 227 (2011) ; see also Albany v. Arcata Assocs., Inc., 106 Nev. 688, 690, 799 P.2d 566, 567–68 (1990). Here, Watson was not a party to the underlying case, and it cannot appeal the district court's order making it jointly and severally liable for more than $500,000 in attorney fees and costs. Therefore, Watson lacks a plain, speedy, and adequate legal remedy and is entitled to seek extraordinary writ relief. As such, this court must now assess whether Watson is entitled to the writ relief it seeks.

NRCP 11 does not supersede NRS 7.085

This court reviews sanctions awarding attorney fees for an abuse of discretion. Emerson, ––– Nev. at ––––, 263 P.3d at 229 ; see also Semenza v. Caughlin Crafted Homes, 111 Nev. 1089, 1095, 901 P.2d 684, 687 (1995). However, we review interpretations of statutes and the NRCP de novo. State v. Catanio, 120 Nev. 1030, 1033, 102 P.3d 588, 590 (2004) ; Moseley v. Eighth Judicial Dist. Court, 124 Nev. 654, 662, 188 P.3d 1136, 1142 (2008).

Watson argues that NRCP 11 supersedes NRS 7.085 because NRS 7.085 is a procedural statute last amended in 2003 and NRCP 11 is a procedural rule that was materially amended in 2004. According to Watson, NRCP 11's 2004 amendment added safe harbor rules that supersede NRS 7.085, such that the statute (1) is now totally superseded by NRCP 11, or (2) at least incorporates NRCP 11's safe harbor provisions. NRCP 11's safe harbor provisions prevent attorneys from being sanctioned until they have the opportunity to cure the sanctionable conduct or appear at an order to show cause hearing. NRCP 11(c). We reject Watson's argument.

Watson relies on State v. Connery, 99 Nev. 342, 661 P.2d 1298 (1983), to support its position that procedural rules supersede conflicting procedural statutes when the rule is enacted after the statute. In Connery, the issue was whether the time for appeal was governed by (1) a statute requiring appeal within 30 days of a district court's oral pronouncement of an order, or (2) a later-enacted appellate rule requiring appeal within 30 days of the district court's entry of a written order. Id. at 344, 661 P.2d at 1299. This court held that the subsequently enacted procedural rule superseded the statute. Id. at 345–46, 661 P.2d at 1300.

However, Connery does not compel the result Watson seeks because it is materially distinguishable from the present matter. In Connery, the rule and statute plainly and irreconcilably conflicted because they provided different dates from which to calculate a strict 30–day appeal window. In this case, however, Watson has not articulated any reason why this court cannot give effect to both NRCP 11 and NRS 7.085, and there is nothing to suggest that the rule and statute cannot be read in harmony. See Bowyer v. Taack, 107 Nev. 625, 627–28, 817 P.2d 1176, 1178 (1991) (“[A]pparent conflicts between a court rule and a statutory provision should be harmonized and both should be given effect if possible.”), superseded by statute and rule on other grounds as recognized by McCrary v. Bianco, 122 Nev. 102, 131 P.3d 573 (2006). Moreover, persuasive authority and Nevada's rules for statutory interpretation strongly support treating NRCP 11 and NRS 7.085 as independent sanctioning mechanisms.

Nevada adopted the 1993 version of Federal Rule of Civil Procedure (FRCP) 11 “in its entirety.” NRCP 11, Drafter's Note 2004 Amendment. As the Advisory Committee Notes on the 1993 amendments to FRCP 11 make...