Del Webb Communities Inc. v. Partington

652 F.3d 1145

80 Fed.R.Serv.3d 66

11 Cal. Daily Op. Serv. 9134

2011 Daily Journal D.A.R. 10,947

DEL WEBB COMMUNITIES, INC., Plaintiff–Appellee,

v.Charles Leslie PARTINGTON, DBA M.C. Mojave Construction; John Wilson, Defendants–Appellants.

No. 10–15975.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 13, 2011.Filed July 20, 2011.

Michael J. Nunez and Edmund G. Farrell, Murchison & Cumming, LLP, Las Vegas, NV, for defendants-appellants.David N. Frederick, Todd M. Touton, and Jennifer L. Braster, Lionel Sawyer & Collins, Las Vegas, NV, for plaintiff-appellee.Appeal from the United States District Court for the District of Nevada, Robert C. Jones, District Judge, Presiding. D.C. No. 2:08–cv–00571–RCJ–GWF.Before: BETTY B. FLETCHER and SIDNEY R. THOMAS, Circuit Judges, and LEE H. ROSENTHAL, District Judge.^*

OPINION

ROSENTHAL, District Judge:

This is an appeal from an injunction against the owner and operators of a Nevada company that inspected homes for construction defects and encouraged homeowners to file claims against their builder under a Nevada statute. Del Webb Communities, Inc., the developer of a retirement community where the company inspected many homes, sued, alleging that the defendants' business practices violated federal and state law. The district court permanently enjoined the defendants from “soliciting and/or performing residential inspections and/or providing inspection reports in ... Del Webb Nevada developments, by means of illegal, unlicensed and false practices, such as the representations, express or implied, that they, or any of them are (1) properly licensed under Nevada law to perform structural inspections; (2) properly licensed under Nevada law ... to perform, provide or communicate inspection reports; and/or (3) are acting as representatives or agents under the authority of Del Webb....” We conclude that the general prohibition against operating “by means of illegal, unlicensed and false practices” is too vague to stand. We affirm the remaining provisions of the injunction but reject the district court's reliance on Nevada's common law of champerty to create a tort cause of action for which Del Webb could obtain relief. We therefore vacate the injunction in part and affirm in part.

I. Background

M.C. Mojave Construction ¹ is a sole proprietorship operated by Charles Leslie Partington. Partington had a limited Nevada B–2 contractor's license but no structural inspection license under Chapter 645D of the Nevada Revised Statutes. John Wilson operated Mojave's “Chapter 40 Claims Division” under a management and profit-sharing agreement with Partington. Wilson held neither a contractor's nor an inspector's license. The claims division's name refers to Chapter 40 of the Nevada Revised Statutes, which “governs actions involving constructional defects.” Shuette v. Beazer Homes Holdings Corp., 121 Nev. 837, 124 P.3d 530, 541 (2005). The statute allows a homeowner who has notified his builder of “constructional defects” to sue the builder for damages if the builder does not repair the defects within a reasonable time. See NRS 40.647; D.R. Horton Inc. v. District Court, 123 Nev. 468, 168 P.3d 731, 737 (2007). Damages under Chapter 40 include the cost of hiring an expert to “[a]scertain the nature and extent of the constructional defects.” NRS 40.655(f). Instead of charging homeowners directly for its inspections, Mojave relied on this provision to obtain payment. Mojave's contracts required homeowners to submit invoices for the inspections to the home-builder and request payment and stated that Mojave would collect its inspection fee “if or when” the builder reimbursed the homeowner. The contracts assigned Mojave the “the right to recover any and all inspection fees from the builder if the builder fails to pay all the inspection fees.”

Mojave inspected many homes in Sun City Anthem, a Del Webb retirement community in Henderson, Nevada.² Mojave distributed fliers door-to-door, posted placards, and advertised through a website. Mojave's fliers and placards included statements that the home inspections were “FREE”; referred to the inspections as “Builder inspections”; referred to the inspectors as “representatives & experts from both MC Mojave Construction & your Builder, his subcontractors and agents”; and stated that it had a “Construction–Lic.” Mojave's various advertisements and solicitations also included statements that the inspections were done by both Mojave and the “Builder's inspection team” and that construction items “found to be deficient” would be repaired “at no cost to the homeowners.” Mojave's advertisements and solicitations encouraged homeowners to file Chapter 40 claims seeking compensation for home repairs against Del Webb.

Mojave provided homeowners with engagement letters for several law firms to begin Chapter 40 actions based on defects listed in the inspection reports that Mojave generated. The engagement letters required the homeowners to pay all litigation costs if the homeowners terminated the attorney-client relationship but obtained home repairs. One of the law firms, Angius & Terry, paid Mojave $500 when a homeowner signed an engagement letter and $1,300 more if the Chapter 40 action succeeded. This law firm sent Del Webb letters instructing it to communicate only with the law firm, not the homeowners, about the homeowners' claimed construction defects, even though Del Webb provided ten-year warranties for its homes beginning in 2001.

Del Webb sued Partington d/b/a Mojave and Wilson in Nevada federal court, seeking damages and injunctive relief. The district court preliminarily enjoined Mojave from conducting further inspections. In ruling on summary judgment motions, the district court held that Mojave's agreements violated Nevada's common-law prohibition against champerty and maintenance, based on Mojave's use of its own funds and resources to instigate and prosecute Chapter 40 actions in which it had no interest and based on the requirement in Mojave's contracts with homeowners that they pay Mojave's fees from the amounts obtained from Del Webb. The district court also held that Mojave was required to have a Chapter 645D license to perform its inspections and that Mojave had falsely represented in its advertising and solicitations that it had such a license.

The district court issued a permanent injunction. The court's findings of fact and conclusions of law included that Mojave committed a tort by violating Nevada's common-law prohibition against champerty; violated the Nevada Deceptive Trade Practices Act by performing inspections without the license required under Chapter 645D; violated both the Nevada Deceptive Trade Practices Act and the Lanham Act by representing that the home evaluations were free and that Mojave was affiliated with Del Webb; and tortiously interfered with Del Webb's warranty contracts with homeowners by instructing Del Webb to communicate only with the lawyers filing the Chapter 40 action. The permanent injunction provided:

IT IS HEREBY ORDERED that Mojave, Partington, Wilson, and their affiliates and others acting in concert with Defendants, are enjoined from soliciting and/or performing residential inspections and/or providing inspection reports in Sun City Anthem, or any other Del Webb Nevada developments, by means of illegal, unlicensed and false practices, such as the representations, express or implied, that they, or any of them are (1) properly licensed under Nevada law to perform structural inspections; (2) properly licensed under Nevada law to ... perform, provide or communicate inspection reports; and/or (3) are acting as representatives or agents under the authority of Del Webb....

The parties resolved the damages claim and stipulated that the permanent injunction was the final judgment. Mojave timely appealed.

II. Jurisdiction and Standard of Review

We have jurisdiction under 28 U.S.C. § 1292(a)(1). Lonberg v. City of Riverside, 571 F.3d 846, 847–48 (9th Cir.2009). We will reverse an order of injunction only if the district court abused its discretion. Perfumebay.com Inc. v. eBay, Inc., 506 F.3d 1165, 1173 (9th Cir.2007). We review factual findings for clear error and legal conclusions de novo. Id.

III. AnalysisA. The General Prohibition Against “Illegal, Unlicensed and False Practices”

Rule 65(d) requires an injunction to “state its terms specifically” and “describe in reasonable detail ... the act or acts restrained.” Fed.R.Civ.P. 65(d)(1)(B)-(C). “The benchmark for clarity and fair notice is not lawyers and judges, who are schooled in the nuances of [the] law,” but instead the “lay person, who is the target of the injunction.” Reno Air Racing Ass'n, Inc. v. McCord, 452 F.3d 1126, 1134 (9th Cir.2006); see also Schmidt v. Lessard, 414 U.S. 473, 476, 94 S.Ct. 713, 38 L.Ed.2d 661 (1974) ( “[T]he specificity provisions of Rule 65(d) are no mere technical requirements. The Rule was designed to prevent uncertainty and confusion on the part of those faced with injunctive orders, and to avoid the possible founding of a contempt citation on a decree too vague to be understood.”).

The permanent injunction prohibits the defendants from “soliciting and/or performing residential inspections and/or providing inspection reports ... by means of illegal, unlicensed and false practices.” The order identifies three prohibited practices as examples—“such as”—of “illegal, unlicensed and false practices”: (1) falsely representing that the defendants are “properly licensed under Nevada law to perform structural inspections; (2) properly licensed under Nevada law to ... perform, provide or communicate inspection reports; and/or (3) are acting as representatives or agents or under the authority of Del Webb.” Even with these examples, the general prohibition against using “illegal, unlicensed and false practices” is too vague to be enforceable. The examples of prohibited past conduct do not sufficiently...