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.

Robison, Belaustegui, Sharp & Low Successfully Defends Civil Rights Lawsuit Against the Nevada State Board of Medical Examiners; Federal Court Accepts Novel Arguments On Immunity and Stay of Discovery.

February, 2011

On March 25, 2011, Judge Kent Dawson of the United States District Court entered an Order dismissing a lawsuit against The Nevada State Board of Medical Examiners, an RBSL client. Michael Sullivan, Barry Breslow, and Frank Gilmore represented the Board in defense of claims filed by Dr. Kevin Buckwalter, alleging violations of his civil rights under 28 U.S.C. 1983. Buckwalter sued the Board for suspending his right to prescribe, administer and dispense controlled substances, alleging that the Board’s conduct violated his constitutional right to due process. On behalf of the Board, RBSL filed a Motion to Dismiss, arguing that federal law immunizes the Board from civil rights lawsuits, and, additionally, the federal court should abstain from hearing the case, pending a formal hearing in front of the Board through the Nevada’s Administrative Procedures Act. Judge Dawson agreed with the Board and dismissed the entire Complaint.

In a highly publicized case covered closely by the Las Vegas press, in 2008 Dr. Buckwalter had been investigated by the Drug Enforcement Agency and the Board of Medical Examiners as the result of a series of his patient deaths resulting from overdose of controlled substances. The investigation led to charges being filed against Dr. Buckwalter before the Board, accusing Buckwalter of four counts of malpractice. After an emergency closed-door hearing, the Board determined that Buckwalter’s conduct “pose[d] a threat to the health and safety of his patients and to the general public” and the Board suspended his ability to prescribe, administer and dispense controlled substances.

Almost two years after the suspension, Buckwalter filed a Complaint against the Board, alleging that the emergency meeting and the resulting suspension deprived him of his constitutional right to due process. Buckwalter sought damages, injunctive relief, and attorney’s fees.

Responding on behalf of the Board, RBSL filed a Motion to Dismiss the claims, arguing that the doctrine of “absolute immunity” precluded physicians from suing the Board for violations of civil rights. Citing an analogy to the immunity enjoyed by Judges and Prosecutors, RBSL argued that the function of the Board is “judicial or quasi-judicial”, and, as such, the Board should be absolutely immune from lawsuits under 28 U.S.C. 1983.

While the Motion to Dismiss was pending, RBSL filed a Motion asking the Court to suspend all document discovery and depositions, arguing that the Board should not have to be burdened with the costs of discovery while the threshold issue of absolute immunity was pending. In a hotly contested hearing, the Federal Magistrate Judge heard arguments from counsel on the Motion to Stay. Buckwalter’s lawyers argued that a stay of discovery was procedurally irregular and would frustrate justice. In a Recommendation For Order submitted to the Court, the Magistrate agreed with RBSL that a stay of discovery was proper until “the threshold issue of immunity is decided.” Because no federal judge in Nevada had previously published an opinion on the issue, the decision was a landmark ruling in the effort to protect the Board from future vexatious discovery practices in future lawsuits.

After discovery was stayed by the Magistrate Judge, the Court ruled on the Board’s Motion to Dismiss. The court agreed with RBSL that the function of the Board is akin to that of a Judge or Prosecutor, and that the Board should be entitled to absolute immunity for all “non-ministerial acts.” The Court then agreed with RBSL that the suspension of Buckwalter’s medical license was a “non-ministerial” act, and the law provided the Board not just a defense against Buckwalter’s claims, but a full immunity from suit.

The Court also set new legal precedent when it adopted RBSL’s argument that the Federal Courts should abstain from exercising jurisdiction over a federal case while a parallel action is pending in front of the Board pursuant to Nevada’s Administrative Procedures Act. Relying on the United States Supreme Court case of Younger v. Harris, 401 U.S. 37 (1971), RBSL argued that the Court should dismiss the case under the Younger Abstention Doctrine. The Court agreed, finding that all four elements of the Younger Doctrine were present: (1) the Board’s administrative hearings were a “state action” that were judicial in nature, (2) the proceedings were ongoing, (3) the administrative hearings implicated an important state interest, and (4) the pending administrative proceedings afforded Buckwalter an adequate remedy. The Court’s opinion on the application of the Younger Abstention Doctrine will be an effective shield against future lawsuits by physicians who improperly bring federal lawsuits without having first exhausted their available Administrative procedures.

Buckwalter has appealed the decision to the Ninth Circuit Court of Appeals. The briefs are due this summer and the case has been set for priority oral argument.

FCG

A PRELIMINARY TITLE REPORT OR A TITLE COMMITMENT IS NOT TITLE INSURANCE.

Frequently clients come to the office having acquired a piece of real property or made a loan secured by a deed of trust on real property only to discover there is a lien or some other encumbrance that has priority over their interest in the property. Clients bring with them a preliminary title report, also known as a title commitment, on which they relied. They will seek to bring an action against the title company that issued the report because the report does not disclose the existence of a title defect or encumbrance. Clients assume they can rely on the preliminary title report or commitment. That is a mistake.

The preliminary title report or a commitment to insure is an offer to issue a policy of title insurance subject to the terms, conditions and exceptions stated in the report and does not constitute a representation as to the condition of title to the real property. The title company is not responsible for omitting a lien or encumbrance in a preliminary report unless its offer to issue a policy of title insurance is accepted, the premium is paid, and the title insurance policy is issued.

The title insurance policy is a contract of indemnity as of the date of the policy but a preliminary report is not. The title policy is not a guaranty. It is a promise to indemnify the insured against losses resulting from defects in the title or for liens and encumbrances affecting the title as described in the policy at the time the policy was issued. The title company is only obligated to disclose in the title policy the encumbrances it is not willing to insure or indemnify against.

As opposed to a preliminary report or a commitment, an “abstract” of title is a written representation by the title company listing all recorded, conveyances, instruments, and documents which impart constructive notice with respect to the chain of title of the real property described in the abstract. The title company does have liability if it issues an abstract of title that fails to list a recorded document that imparts constructive notice. However, a preliminary report or title commitment is not an abstract.

The lesson here is to pay the premium and have the title policy issued. It is penny wise and pound foolish to pay for a preliminary report and not take the next step and obtain the appropriate policy of title insurance.

ORGANIZING OF A NEVADA LIMITED LIABILITY COMPANY – TRAPS FOR THE UNWARY

The Nevada Secretary of State has made it very easy to organize an LLC by providing a form of articles of organization with seven blanks that need to be completed. The form requires the signature of the organizer and the registered agent. The LLC is considered to be legally organized when it has filed its Articles and has paid the filing fees. Although the LLC may be legally organized, that is simply the beginning of what the members should do to document their understanding and expectations with respect to management and ownership percentages, profits and losses, the transferability of their interests, and other matters.

Limited liability companies by statute are not required to have an operating agreement. However, without an operating agreement, an LLC with more than one member is a ship without a rudder. In the absence of an operating agreement, there are limited provisions in the statutes governing the management of the LLC. If there is no operating agreement, the management of the LLC is vested in its members in proportion to their contributions to its capital.

Capital may be contributed to an LLC in cash, property, or services. Frequently, one member contributes cash or property and the other member contributes his expertise or services. In the absence of an operating agreement, the member contributing services may have no capital account. The member contributing cash or property may end up with all of the voting rights to the detriment of the member providing services only.

If a member contributes cash with the intent that it be repaid so that the cash is in the form of a loan, that is not considered as contribution to capital for voting purposes. Thus, it is very important for the members to clearly understand this distinction. Again, without an operating agreement, all cash contributions may be considered as capital giving the contributing member more voting power than the parties intended.

If there are only two members and the parties intend for each to have one vote or equal capital accounts, then the possibility of a deadlock is very real because neither member has voting control. The member that is designated as the manager cannot be removed. Even if there is an operating agreement with equal voting percentages, deadlocks can occur. This possibility must be anticipated and a mechanism for resolving deadlocks must be provided.

With respect to distributions or division of profits, if there is no operating agreement, the profits and losses are allocated proportionately to the value of the capital contributions made by each member and not returned. Again, the amounts in the capital accounts become vital.

The lesson to take away is that you should, before beginning your business using an LLC, have an operating agreement prepared and executed by all of the members. This can be done prior to filing the LLC=s articles of organization and will ensure there is a clear understanding among the members with respect to the myriad of operating issues that can arise. Without an operating agreement, expensive litigation between the members is almost a sure thing.

Shareholders selected for inclusion in The Best Lawyers in America®, 2011

Kent Robison, DeArmond Sharp and Keegan Low were recently selected by their peers for inclusion in The Best Lawyers in America®.

Kent Robison was listed in the areas of Bet-the-Company Litigation, Commercial Litigation and Personal Injury Litigation. DeArmond Sharp was listed in the areas of Corporate Law and Real Estate Law. Keegan Low was listed in the area of Commercial Litigation.

Since its inception in 1983, Best Lawyers has become universally regarded as the definitive guide to legal excellence.

Robison, Belaustegui, Sharp & Low and its Members Achieve Top Rankings

In June 2010, Chambers and Partners ranked Robison, Belaustegui, Sharp & Low and its members Kent R. Robison and F. DeArmond Sharp as being among the top law firms and lawyers in the state. Chambers and Partners, the publisher of the widely-utilized, annual directory for the legal profession in America, Chambers USA, conducts independent and objective research, interviewing thousands of lawyers and their clients. By way of that research, Chambers and Partners identified Robison, Belaustegui, Sharp & Low as a top ranked law firm and Kent R. Robison and F. DeArmond Sharp as top ranked lawyers in Nevada.

Robison, Belaustegui, Sharp & Low fell into the third ranking among Nevada’s top litigation firms. Chambers quoted sources who described Robison, Belaustegui, Sharp & Low as “A fine team of litigators.”

Regarding Robison, Belaustegui, Sharp & Low’s members, Kent R. Robison was ranked first among Nevada’s litigation lawyers. Sources described Kent as being “regarded as ‘the best trial lawyer in northern Nevada.’” F. DeArmond Sharp was also recognized as a notable practitioner, being considered “a fantastic lawyer and gentleman, and a great resource for complex transactions and foreclosures.”

One of Nevada’s First Registered Domestic Partnership Adoptions of a Minor Child

Recently, our firm successfully facilitated one of Nevada’s first Registered Domestic Partnership adoption, since the enactment of the Nevada Registered Domestic Partnership Act, NRS Chapter 122A.

Nevada’s Registered Domestic Partnership Act grants domestic partners “the same rights, protections and benefits,” and subjects them to “the same responsibilities, obligations and duties under law… as are granted to and imposed upon spouses.” NRS 122A.200(1)(a).

With this legal recognition, registered domestic partners are able to adopt their partner’s children as if the partners were spouses. Consequently, the process by which one partner can adopt the other’s children is simplified. For example, the consent requirement set forth in NRS 127.043 is inapplicable when “the spouse of a petitioner is related to the child within the third degree of consanguinity.” NRS 127.043(2). Likewise, the investigation and affidavit filing mandates enumerated in NRS 127.120 and 127.127 are also rendered inapplicable under the same circumstances.

However, one issue that remains potentially problematic even in light of the enactment of NRS Chapter 122A is artificial insemination. In the instance where the child sought to be adopted by one domestic partner was conceived by the other domestic partner via artificial insemination, the question arises as to whether the petitioning domestic partner must first obtain the natural father’s consent to the adoption (which is unlikely considering his unidentified status), or whether the partner must move to terminate the unidentified donor’s parental rights prior to petitioning for adoption.

Nevada does not have any statutes or caselaw addressing an unidentified donor’s rights to a child conceived from his donation. Unlike Nevada, California appears to be more advanced in the law regarding artificial insemination issues, as evidenced by California Family Code §7613(b). §7613(b) provides, “The donor of semen provided to a licensed physician and surgeon or to a licensed sperm bank for use in artificial insemination… of a woman other than the donor’s wife is treated in law as if he were not the natural father thereby conceived.” (Emphasis added.)

Due to the lack of authority on artificial insemination in Nevada, coupled with Nevada’s new Registered Domestic Partnership Act, it will be interesting to see whether courts will make the recently simplified adoption process for domestic partners a bit more time consuming by requiring a petitioning partner to conduct the seemingly arbitrary exercise of moving to terminate an unidentified donor’s parental rights prior to filing a petitioning for adoption.

O.J. Simpson Affects Jury Selection in Nevada. Stephens Media, LLC v. Distr. Ct., 125 Nev. ___, 221 P.3d 1240 (2009).

O.J. Simpson’s criminal trial in Las Vegas has raised a significant legal issue by which the First Amendment right to free press competes with a criminal defendant’s Sixth Amendment right to a fair trial. The Nevada Supreme Court recently ruled that once the district court weighs and balances the competing factors, juror questionnaires can be made public and must be given to the media. The obvious concern is the personal information divulged by prospective jurors that is made public. Trial lawyers argue that this invasion into prospective jurors’ privacies is unconstitutional and should be avoided. The media argues that since jury selection is part of the public trial, all information gleaned therefrom should be considered public.

Soon, Nevada and other states’ courts will have to struggle with whether jury questionnaires are available to the media in civil trials. See [cite case]

Courts’ Increasing Concern with Jurors’ Social Networking Capabilities.

When serving as a juror, most individuals are in a place and system they know little about, except through such sources as the press, television, movies and more recently the digital media. Cell phones now provide jurors with the ability to communicate about the trial with the outside world. Juror misconduct in this regard is becoming an increasingly serious issue with the administration of justice. Jurors have the capability to instantaneously tweet, blog, text, e-mail, phone and look up facts and information during breaks, at home or even in the jury room if they are allowed to keep their digital access to the world while serving as a juror. And despite the prohibition of cameras in the courtroom, most cell phones are equipped with camera and video capabilities.

Judges throughout Nevada take different approaches in addressing this potential form of jury misconduct. Some do not allow jurors to have their cell phones. Others give jury instructions on a daily basis.

As trial lawyers we advocate a compromise that allows jurors to alleviate anxiety, while still protecting sanctity of the jury trial process. First, the matter must be addressed in jury selection by the trial court. Second, an instruction should be given to the jury each day that includes follow-up reminders from the judge that any outside contact through electronic means concerning the trial, the lawyers, the witnesses, or any facet of the trial is prohibited and can cause a mistrial. It has been our experience that jurors are respectful of the need to prevent a mistrial and are mindful of the consequences if repeatedly reminded that contact with the outside world concerning trial issues is strictly prohibited.

Welcome to our new website!

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Please don’t hesitate to contact us regarding any questions you may have and we look forward to having the opportunity to serve you.

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