Monthly Archives: August 2011

Nevada Supreme Court Affirms RBSL’s Full Faith And Credit Challenge to Penal Judgments

On August 4, 2011, the Nevada Supreme Court delivered its opinion in City of Oakland v. Desert Outdoor Adv.,127 Nev. Adv. Op. No. 46, affirming the Order of Judge Kosach of the Second Judicial District Court, who found that the United States Constitution does not mandate Full Faith and Credit to sister-state penal judgments. In a 4-3 decision, the Supreme Court held that RBSL client Desert Outdoor Advertising was not subject to garnishment of its Nevada assets under a judgment obtained by the City of Oakland in California’s Alameda County Superior Court. The City of Oakland had obtained a significant judgment against Desert Outdoor for violation of Oakland and California law for display of unpermitted commercial signage. When Oakland attempted to record the judgment in Nevada (commonly referred to as “domestication”), and began garnishment of Desert Outdoor’s Nevada assets, RBSL challenged the domestication in Nevada, on the basis that the City of Oakland’s judgment was a penal judgment, based on a criminal statute, and that Nevada courts were not constitutionally required to recognize California’s penal code, or its penalties. After briefing and oral argument before the Nevada Supreme Court, en banc, the Court agreed.

This landmark Nevada decision is the first among the 50 states to formally apply the “penal exception” to the Full Faith and Credit Clause, which was first recognized by the United States Supreme Court in the 1892 case of Huntington v. Atrill, 147 U.S. 657. Huntington involved a judgment obtained in New York based on a statutory provision imposing joint and several liability on the officers of a corporation for the debts of the corporation if the officer made any materially false representation in a certificate, report, or public notice. The New York judgment was then domesticated in Maryland. The defendant challenged the domestication on the grounds that the judgment “was for recovery of a penalty . . . under a statute of the state of New York.” The Maryland Court of Appeals invalidated the domestication on the grounds that liability of the New York statute “was intended as a punishment for doing any of the forbidden acts, and was, therefore, . . . a penalty which could not be enforced in the state of Maryland.” The case was appealed to the United States Supreme Court, on the argument that Maryland unconstitutionally denied full faith and credit to the New York judgment. The Court first recited the fundamental maxim of international law stated by Chief Justice Marshall: “The courts of no country execute the penal laws of another.” The Court then held that whether a judgment is “penal” and not enforceable by a sister-state, depends on whether the purpose of the law “is to punish an offense against the public justice of the state, or to afford a private remedy to a person injured by the wrongful act.” The Supreme Court held that the New York law was penal in nature and not entitled to Full Faith and Credit.

The Nevada Supreme Court applied Huntington to the City of Oakland judgment, and concluded that the judgment was a penal judgment intended to punish an offense against the public. Thus, the City of Oakland judgment was found to be penal in nature. However, the Court recognized that Huntington had not been directly applied to a similar state court action by the United States Supreme Court, or its Circuit Courts, since its pronouncement in 1892. Accordingly, the Court questioned whether the Huntington “penal exception” was still good law. Although three of the Justices argued in a written dissent that the Huntington “penal exception” was dicta, meaning that the penal exception was not necessary to the ultimate determination of the Huntington case, the four-Justice majority ultimately found that the penal exception had not been overruled, that it was rooted in sound constitutional principles, and, therefore, Nevada cannot enforce California penal judgments.